Chainlink: Major Supply Crunch Confirmed – Is a Breakout on the Horizon?

This article delves into Chainlink's recent supply crunch, marked by significant accumulation and a reduction in the liquid supply on exchanges. These changes could potentially signal an upcoming price breakout, driven by enhanced market confidence among traders and a consistent downtrend in LINK's exchange reserves.

Key Takeaways

The reduction in liquid supply indicates robust accumulation and a shift towards long-term holding, enhancing bullish prospects for Chainlink.
Data from futures markets reflects strong buy dominance, signaling growing optimism among traders for a potential breakout.
Since January, Chainlink’s [LINK] exchange reserves have decreased significantly, highlighting aggressive investor accumulation efforts.
Over 15 million LINK have been withdrawn in the past month, reducing the supply on exchanges to about 15% of total tokens.
This trend suggests a movement towards long-term holding and decentralized integrations instead of short-term trading.
Historically, substantial outflows lead to lesser liquidity and often create a favorable setup for upward price movements.

Chainlink: Major supply crunch signal, confirmed – Is a breakout coming?

Will Buyers Protect the $15.61 Support Level?

As of now, LINK is trading around $16.17, experiencing an 8% drop for the day. Despite this setback, its overall price action remains technically sound, forming a descending channel. Buyers have reliably defended the $15.61 support, which is crucial in preventing LINK from falling to a more significant support level at $12.86.

The Parabolic SAR indicator is positioned near $18.04, indicating that a decisive upward movement past this level could ignite new bullish momentum. Key resistance points to watch are at $19.14 and $23.79, which will serve as critical zones for confirming any breakout. If buyers sustain their accumulation around the lower boundary, LINK could show signs of consolidation, potentially leading to a mid-term recovery.

Source: TradingView

Long-term Accumulation Trends

On-chain metrics illustrate that on November 3rd, LINK experienced a net outflow of $5.41 million, continuing a trend of consistent accumulation since the middle of the year. Exchange reserves have shifted from 18% to 15% of the total supply, reflecting growing confidence among holders who are moving their assets to staking contracts or cold wallets.

These ongoing outflows commonly lead to a decrease in selling pressure, creating a bullish liquidity imbalance that can enhance price strength. Historically, similar reductions in circulating supply have preceded significant price rebounds as the demand gradually rises. This behavior supports the ongoing accumulation phases seen in previous LINK cycles, where major holders took advantage of dips to bolster long-term positions.

Chainlink outflows Source: CoinGlass

Growing Optimism Among Traders

The Futures Taker CVD (90-day) indicator reflects clear dominance of buyers, indicating that traders are increasingly favoring long positions in derivatives markets. This trend suggests heightened trader confidence, aligning well with the observed on-chain accumulation patterns.

With buyers outnumbering sellers in Futures activities, it indicates a belief that LINK’s current price dip might set the stage for a reversal. Moreover, the combination of spot accumulation and bullish derivatives data strengthens the overall positive outlook. However, some volatility may still occur in the short term, as any reduction in buying momentum could temporarily challenge market resilience before potential further gains materialize. Nonetheless, the prevailing evidence indicates that traders are gearing up for an upward phase.

Source: CryptoQuant

Is a Chainlink Supply Squeeze Happening?

With buyers actively defending the $15.61 support and momentum appearing to shift, a break above $18.04 could indicate a reversal, with targets set at $19.14 and $23.79. Although immediate volatility might still occur, LINK's structure indicates an underlying accumulation strength amidst surface-level weakness. Overall, the data suggests that a rebound may be on the horizon, fueled by increasing investor confidence and a decreasing supply base on exchanges.