Chainlink is now trading at half the price of a few months ago, after entering price discovery mode and setting new highs after highs.
If the once unstoppable altcoin is unable to close this week’s candle above $ 11 per LINK token, then its price could drop much lower.
Why Chainlink’s weekly close is even more crucial
Chainlink’s 2020 was by far even brighter than it was for Bitcoin or Ethereum. Even after falling over 50% from highs, altcoin still has over 400% ROI to show its rise to date.
Even a drop to $ 1 on Black Thursday was bought with extreme fury, and the rebound effect partly helped propel Chainlink to a new high after high throughout the year.
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However, after hitting $ 20, things crashed and the altcoin has faltered ever since. Several attempts to return to highs have been crushed, although Bitcoin is as bullish as it gets.
Now, Chainlink is back at just $ 10 and is on the cusp of a particularly critical weekly close that could lead to a lower altcoin spiral.
LINKUSDT May Fall 40% From Current Levels
As noted above, LINKUSDT has started to break down below the median moving average of the Bollinger Bands Technical Analysis Indicator.
Related reading | This graph suggests that Chainlink’s parabolic rise is not over
A candle that closes in the middle BB in both directions is considered a buy or sell signal and often results in a large move. Note that in the chart above, closing the candle above the midline is what sent Chainlink into overdrive in 2020.
The tool has been so effective in acting as a sell signal for LINKUSDT in the past in weekly time frames, that over the previous five times the asset has closed lower, causing an average decline of 43%. The corrections vary from 20% to 70%, which puts 43% between the two statistics.
A 43% drop from here would place Chainlink at around $ 6, which was the last touch of support before the altcoin took off with a parabolic push to $ 20.
Some analysts claim the parable is not over, but even $ 6 might not be the end result if they are wrong. According to experts like Peter Brandt, who accurately assessed Bitcoin’s 84% drop a year earlier, they say any asset that loses such a powerful trajectory is set to decline almost as much.
A full 84% withdrawal on Chainlink, just like Bitcoin did, would bring it to $ 3. A drop of 90% or more, as other altcoins have done, would take the cryptocurrency down to a dollar and a half by LINK.
While this may sound shocking for such a promising cryptocurrency, remember that all cryptocurrencies have experienced such declines in their lifetime. Except maybe Chainlink, why will it be any different?