3 Reasons Why Chainlink (LINK) Could be Gearing up for a Rally

Chainlink (LINK) had its shining moments in April this year, when its price soared to almost $30. However, over the past several months, it has been in significant decline, plunging by 55% from its local high.

Certain factors, though, suggest the valuation may be poised for a substantial resurgence in the short term.

Grayscale and More

A few days ago, the leading digital asset manager, Grayscale, released a report describing Chainlink as “the critical connective tissue between crypto and traditional finance.”

The company also mentioned the network’s native token, LINK, calling it “the largest asset in the Utilities & Services Crypto Sector” which “provides broad exposure to the crypto economy.”

Highlighting a certain crypto project and its native coin is nothing new for Grayscale. At the start of October, it praised Zcash and reminded that its Zcash Trust is open for private placement to eligible accredited investors. Shortly after, ZEC’s price started booming and is currently worth over $540, representing a 600% increase from its valuation prior to the announcement.

The second factor that could spark a rally in Chainlink’s cryptocurrency is the potential launch of a spot LINK ETF in the United States. Such a product will allow investors to gain exposure to the asset while removing some burdens, such as the need to safeguard it themselves. This may increase the interest in LINK and positively impact its price.

The entity willing to introduce the investment vehicle is Grayscale, and according to Bloomberg’s Eric Balchunas, the ETF may see the light of day before the end of November.

While the launch of the product is generally considered bullish, traders should beware of a potential “sell-the-news” effect that could occur once the news becomes official. A similar effect was observed after the introduction of Canary Capital’s spot XRP ETF in mid-November (however, other factors also contributed to the drop).

Last but not least, we will touch upon LINK’s exchange reserves. Earlier today (November 24), the amount of tokens stored on centralized exchanges plunged to approximately 128.4 million, or the lowest level since the summer of 2022. This suggests that many investors have moved their holdings to self-custody, thereby reducing selling pressure.

LINK Exchange Reserves, Source: CryptoQuant

Something for the Bears

The recent efforts of the whales, on the other hand, signal that LINK’s valuation may be headed for a decline. X user Ali Martinez revealed that large investors have sold or redistributed more than 31 million tokens over the past three weeks.

The USD equivalent of the stash is almost $400 million, whereas the total possessions of these market participants have decreased to 158.5 million, or 22% of LINK’s circulating supply.

A sell-off of that type is typically bearish for the price, as it may trigger panic among smaller players who often mimic the big shots. Furthermore, it leaves open the possibility that the whales may know something we don’t, which is why they offload en masse.

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