Chainlink Becomes Long-Heavy As Price Clears $16: Top Here?
December 08 2023 - 2:00PM
NEWSBTC
Chainlink has seen long contracts pile up on Binance during the
past day, which may lead toward a top for the cryptocurrency.
Chainlink Funding Rate On Binance Has Turned Highly Positive
According to data from the on-chain analytics firm Santiment, the
Chainlink funding rate on Binance has now reached the highest level
in about four weeks. The “funding rate” refers to the periodic fee
that derivative traders on any given platform are exchanging with
each other right now. When the value of this metric is positive, it
means that the long holders are currently paying a fee to the short
investors in order to hold onto their positions. Such a trend
suggests a bullish mentality is dominant on the platform. Related
Reading: 63.2% Of PEPE Holders Now In Profit: How This Compares
With DOGE, SHIB On the other hand, negative values imply a bearish
sentiment is shared by most LINK traders on the exchange as the
shorts outweigh the longs. Now, here is a chart that shows the
trend in the Chainlink funding rate on cryptocurrency exchange
Binance over the last few months: The value of the metric appears
to have seen a large spike recently | Source: Santiment on X As
displayed in the above graph, the Chainlink funding rate on Binance
has assumed significantly positive values following the asset’s
surge beyond the $16 mark. Longs currently outweigh the shorts by
the highest ratio since November 11th, when the cryptocurrency’s
price set its then-yearly high, which the coin has now surpassed.
Historically, longs piling up on the derivatives market have often
been negative for the price. This is because a mass liquidation
event called a “squeeze” is usually more likely to affect the side
with the most positions. In a squeeze, a sudden swing in the price
triggers a large amount of liquidations, which only feed into the
swing further and end up leading to a cascade of more liquidations.
As the Chainlink funding rate is significantly positive, a long
squeeze could be more likely to happen than a short squeeze. Last
month, the asset hit its local top in these conditions, so the same
might also repeat this time. If LINK does observe a drawdown
shortly, though, the decline may not be too extended. This is
because there appears to be some strong on-chain support present
between the $14.4 and $14.8, as analyst Ali pointed out in an X
post yesterday. Looks like LINK has little resistance ahead |
Source: @ali_charts on X In on-chain analysis, levels are defined
as resistance and support based on the total number of investors
who acquired their coins at said levels. From the chart, it’s
visible that 17,000 addresses have their cost basis inside the
$14.4 to $14.8 range, which means it’s possibly a zone of strong
support. Related Reading: Bitcoin Whales Driving The Rally Are Now
Taking Profits, Data Suggests On the contrary, the levels above the
current one are thin with investors, meaning that they shouldn’t
pose too much resistance should the rally continue. “As $LINK has
regained the $16 threshold, watch if a bit of FOMO forms a local
top, or if prices continue surging toward $20 with little
resistance,” notes Santiment. LINK Price LINK had earlier broken
past the $17 mark, but the asset has since seen some pullback as
it’s now trading under the level once more. LINK has shot up during
the past day | Source: LINKUSD on TradingView Featured image from
iStock.com, charts from TradingView.com, IntoTheBlock.com,
Santiment.net
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