Chainlink price decline to extend further following profit booking; $500 million LINK close to break-even

Chainlink price has wiped a sizeable chunk of the rally noted by the altcoin since the beginning of the month. The next leg of the price action is likely going to continue this decline as investors are more prone to booking profits now than ever, which could lead to further drawdown.

Chainlink price extends decline

Chainlink price, trading at $14.32 at the time of writing, has declined by about 19% in the last ten days. Consequently, it lost the $15.00 support line and is close to losing the $14.00 support as well.

The Moving Average Convergence Divergence (MACD) indicator is maintaining the bearish crossover witnessed over a week ago. The receding red bars on the histogram do suggest waning bearishness, but this is expected to intensify going forward.

If LINK fails to cement $ 14.00 as a support line, it might end up falling towards $13.00 or lower, wiping out nearly half of the gains noted in the past month.

LINK/USD 1-day chart

However, if the gradual increase continues and the Chainlink price manages to breach above the $15 resistance level, it would invalidate the bearish thesis. This would also boost LINK to rally beyond $16.50 to mark fresh year-to-date highs.

Chainlink holders could contribute to the price fall

Chainlink price consistently declining might not be what the investors want since it is threatening the profits gained by them in the past month. This is particularly the case for investors who bought their supply of LINK around the current price. The In/Out of the Money Around Price (IOMAP) indicator measures the profitability of the supply bought within 15% of the price, showcasing potential immediate outcomes.

Per the indicator, about 34.97 million LINK worth over $500 million is close to losing its profitability if Chainlink price falls below the acquisition price of $14.08. In order to ensure that this does not happen, it is likely that LINK holders might choose to offset their losses by selling their holdings.

Chainlink IOMAP

This thesis is supported by the Market Value to Realized Value Ratio (MVRV) as well. The MVRV ratio is an indicator that is used to assess the average profit/loss of investors who purchase an asset. The 30-day MVRV ratio measures the average profit/loss of investors who bought the asset in the past month. 

For Chainlink, the 30-day MVRV stands at 18%, which indicates that investors who purchased LINK in the past month are sitting at 18% profit. These investors are likely to sell their holdings to realize profits, which could trigger a sell-off. As seen in the chart, when MVRV hits 13% to 24%, LINK has undergone major corrections. Hence, this area is termed a danger zone.

Chainlink MVRV ratio

Thus, profit booking would lead to an extension of the ongoing decline.