Chainlink Gains Ground Amid Industry Challenges: A Potential Revolution or Investor Risk?
Summary:
Chainlink (LINK) has experienced growth surpassing major cryptocurrencies such as Bitcoin and Ethereum since September. While it enjoyed a 35.5% surge last month, it faced a 10% correction in October, creating concerns among investors. Chainlink's increase was catalyzed by SWIFT's report suggesting attaching existing systems to blockchains is a more viable route than merging different central bank digital currencies. Despite positive news and developments, issues regarding authorization numbers and declining protocol revenues have left cause for investor uncertainty.
Chainlink (LINK) has recorded growth of more than 25% since September, exceeding Bitcoin (BTC), Ethereum (ETH), and numerous altcoins. Presently, it's the dominant decentralized oracle solution on the blockchain and is at the 15th spot in market capitalization, discounting stablecoins. After an impressive 35.5% surge in September, LINK has experienced a 10% correction period in October. The fear among investors is that breaching the $7.20 support level could bring about a downward reaction, potentially negating the earnings seen in the prior month.
As of September 30, LINK's concluding price stood at $8.21, the peak in over 10 weeks, but when seen in the grander scheme of things, Chainlink's price remains a significant 86% under its record high in May 2021. Furthermore, LINK has barely increased over the past year, while Ether (ETH) has recorded a gain of 21.5%.
LINK's growth was primarily spurred by SWIFT (Society for Worldwide Interbank Financial Telecommunication), the premier for international financial transactions messaging, when it published a report titled "Connecting Blockchains: Overcoming Fragmentation in Tokenized Assets" on the last day of September. The report hints that tethering existing systems to blockchains is a more plausible course than merging diverse central bank digital currencies (CBDC).
Following a few tests, SWIFT demonstrated its capability to offer a solitary access point to several networks, utilizing existing infrastructure. It relied upon Chainlink's Cross-Chain Interoperability Protocol (CCIP), which could significantly diminish operative costs and issues for institutions facilitating tokenized assets.
Chainlink's value rise can also be traced back to successful trials of their Australian dollar stablecoin by the Australia and New Zealand Banking Group (ANZ), making use of Chainlink's CCIP solution. On September 14, ANZ broadcasted the transaction as a crucial turning point. ANZ executive Nigel Dobson stated that the concept of tokenizing tangible assets could redefine the banking industry.
On September 21, Chainlink declared the mainnet launch of the CCIP protocol on Ethereum major layer-2 protocol, Arbitrum One. The incorporation claims high throughput and cost-effective scaling solutions. StarkWare, yet another Ethereum scaling technology enterprise, had previously made use of Chainlink's oracle services.
Indeed, positive news ended on September 24 when a user, @StefanPatatu, challenged Chainlink on a social network (formerly Twitter) for reducing the number of approvals needed on its multi-signature wallet, perceived as a security measure initially. Chainlink dismissed the issue, stating it to be part of a normal signer rotation process. However, this response did not counter Chris Blec, a crypto analyst, criticizing that the whole DeFi ecosystem could easily fall if Chainlink's signatories "go rogue."
Chainlink's key metric, the protocol revenue, resulting from its price feeds, has been slipping over the last four months. Even though Ethereum's total value locked (TVL) slipped from $28 billion to $20 billion (a decline of 29%), this does not wholly account for the fee discrepancy, hence posing questions about Chainlink's revenue model viability.
Remember that Chainlink delivers more than just pricing feed generation and operates on multiple chains, though Ethereum's oracle pricing services are still at the core of the protocol's business pursuits. Despite Chainlink's situation, Uniswap (UNI), the leading decentralized exchange, possesses a market capitalization of $2.38 billion, which is 42% lower than Chainlink, had a total value locked (TVL) of $3 billion and managed to generate $22.8 million in fees in September alone.
Investors have reasons to question if LINK will hold its $7.20 support level and retain its $4.1 billion market capitalization.
This piece serves for informational aims only and is not meant to be direct legal or investment advice. The ideas, thoughts, and judgments declared here belong solely to the author and do not essentially represent the views and opinions of Cointelegraph.
Published At
10/11/2023 7:30:00 PM
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