- Chainlink saw a highly positive social sentiment score over the past weeks.
- It was unclear if LINK bulls could maintain this rally.
Chainlink [LINK] posted gains of 24% over the past week. A post from Santiment on X (formerly Twitter) noted that social engagement was also rising behind certain altcoins, LINK being one of them.
📊 #Crypto market caps have edged up +0.5% over the past week, despite trading volumes dropping off -20.3% compared to the week prior. Highlight assets have included $FLR, $RON, $LINK, $TAO, and $RNDR. #Bitcoin continues seeing less attention as eyes turn to pumping #altcoins. pic.twitter.com/jMvJSTdV7c
— Santiment (@santimentfeed) February 5, 2024
A recent AMBCrypto report noted that stablecoin inflows represented increased buying power in the crypto market.
This, in turn, pointed toward the possibility of altcoins seeing rapid due to the increased buyer dominance.
Investigating LINK’s rally
Since the 17th of November, LINK has traded within a range that extended from $12.85 to $16.6.
On the 1st of February, LINK bulls managed to force a one-day trading session close above $16.6, breaking the range formation.
Analysis of the data from Santiment showed high positive engagement for LINK across social media platforms. This was also accompanied by a sharp rise in Open Interest in the Futures market.
This pointed toward enthusiastic bullish sentiment but came with some caveats.
As the Santiment post on X (formerly Twitter) noted, the trading volume across the crypto market reduced by 20.3% compared to the previous week. Therefore, the gains were not even across the altcoin market.
The potential for a short-term top before another drop in prices across the market was present because Bitcoin [BTC] faced intense resistance in the $43k-$44k region.
The Santiment chart above showed a fall in both the development activity and the mean coin age.
The dev activity drop was one of the biggest ones seen in the past six months, which could be concerning for investors.
The falling mean coin age even as prices burst past the $16.6 resistance meant holders were eager to book profits.
Combined with the hike in OI, the rally to $18.88 could be driven by speculation rather than spot market demand.
Assessing the chances of a short-term retracement
AMBCrypto analyzed the spot CVD data from Coinalyze to understand the behavior of traders in the spot markets. After a steep jump on 1st February, the spot CVD has trended downward.
Meanwhile, prices continued to go up alongside the OI (as seen on the earlier Santiment chart).
Read Chainlink’s [LINK] Price Prediction 2024-25
The Funding Rate remained positive, showing bullish short-term sentiment. Putting the different elements together, it appeared likely that the LINK rally was overextended.
A retest of the former range highs at $16.6 could unfold over the coming days. Traders could look for opportunities to go long in such a scenario.