An On-Chain Signal Indicates Potential Crash for Chainlink
An on-chain signal that has historically preceded significant crashes for Chainlink has reemerged for the cryptocurrency. The 30-day Market Value to Realized Value (MVRV) ratio for Chainlink recently surpassed the 20% mark, a level that has previously led to sharp declines in the price of LINK.
Understanding the MVRV Ratio
The MVRV ratio compares the market cap of Chainlink with the amount that investors have actually invested into it, known as the realized cap. When the MVRV ratio is above 1, it indicates that investors are in profit and may be more likely to sell, potentially leading to an overpriced asset and a correction. Conversely, values below the threshold suggest undervaluation and net unrealized losses in the market.
Historical Trends and Potential Decline
An analyst has identified a trend in which Chainlink experiences steep drawdowns when the 30-day MVRV ratio surpasses 19%. This has occurred twice in recent years, resulting in declines of around 34.5% each time. With the ratio once again exceeding this significant level, there is a possibility that LINK may experience a similar drop in the near future.
Current Price and Implications
Chainlink has seen significant growth over the past month, with its price reaching nearly $8 and experiencing a 34% increase. However, considering the MVRV ratio, this upward trend may be coming to an end.
Hot Take: Is Chainlink Heading Towards a Crash?
The recent surge in Chainlink’s 30-day MVRV ratio suggests that a potential crash may be on the horizon. Historical data indicates that when the ratio surpasses 19%, the cryptocurrency experiences significant declines. With LINK currently above this threshold, it’s crucial for investors to monitor the market closely and be prepared for a potential drop in the coming days or weeks.
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