Crypto Market Round-Up

Typically, cryptocurrencies are termed as digital currencies and use blockchain technology to record every transaction. Chainlink (LINK) is a decentralized cryptocurrency founded in 2017 which enables transactions through an oracle network. The Chainlink network is run by a huge open-source community such as data providers and developers, which help technology interact securely with external data feeds. LINK has a market capitalization of ~USD 3.79 billion (as per TradingView as of September 29, 2022).

Last week, the benchmark S&P Cryptocurrency Broad Digital Market (BDM) Index started on a negative note and maintained bearish momentum for the entire week. The index dropped by 84.256 points (~4.93%) to 1623.992 for the week ending September 23, 2022. In the current week starting September 26, 2022, the index is trading with positive momentum. Also, other major cryptocurrencies such as Bitcoin and Ethereum are witnessing bullish momentum for the current week.

Having understood the S&P Cryptocurrency BDM Index movement over the last week and the scenario for the upcoming week, one crypto that seems ‘Bearish’ at the current level appears to be Chainlink (LINK) Perpetual Futures based on the below technical parameters: -

Chainlink (LINK) Perpetual Futures:

Noted below are the generic insights, indicative entry price, support levels, and resistance for the next 1-2 weeks duration for the LINK:

Entry level and Support Levels as mentioned herein are only indicative in nature as per trend analysis and further evaluation is required when looking at cryptocurrency under discussion.

Note: The reference Information in this report has been sourced from TradingView.

LINK Technical Analysis Summary (On the 4 hourly Chart):

On the 4 hourly chart, LINK’s prices are sustaining below the upward sloping trend line resistance at the USD 8.485 level and facing the resistance of the trendline, indicating negative movement in price action. Moreover, the prices are trading below the trend-following indicators 21-period SMA, indicating downside momentum in the cryptocurrency. Further, the leading indicator RSI (14-period) is showing a reading of ~47.21 level, indicating negative momentum.

The momentum indicator MACD histogram is trading below the centerline, supporting a negative stance. Moreover, the prices are trading below the Parabolic SAR indicator, which may act as a resistance level. Now the next support level appears to be at USD 6.60, and prices may test this level in the coming sessions (1-2 weeks).

Noted below are the illustrative points as key positives and risks when looking at Chainlink (LINK) in the cryptocurrency space: -

Illustrative points as Positives:

• Growing Significance: LINK is a cryptocurrency that aims to incentivize a network of computers globally to provide real-world data to smart contracts running over blockchains. With Chainlink 2.0, hybrid contracts can be executed, taking information from off-chain networks.
• LINK Tokens: The data feeds from oracle help to execute the smart contracts in blockchain. To incentivize data accuracy, LINK tokens were paid to node operators in the Oracle network. Smart contracts enhance blockchains that can execute tamper-proof code besides storing the tamper-proof data.
• Efficient and Secured Smart Contracts: Chainlink’s high-quality node network securely validates the data computations from off-chain sources with more scalability and runs smart contracts efficiently. The decentralized computation provides reliable and secured applications.

Illustrative points as Risks:

• Decentralized Data: Chainlink relies upon the oracle network. With the limited number of oracles, the data can be more decentralized. Also, the development speed is lower, which may affect the real working solution for executing financial transactions.
• Fee-based: LINK Tokens run on Ethereum and charges a fee to those participating in transactions. Unlike Bitcoin, it doesn’t have a lifetime limit on the number of coins, and hence this may affect the price.

Conclusion:

Based on the above-mentioned price action analysis and technical indicators outlook, Chainlink (LINK) perpetual futures may witness movement in the downside direction. The trend looks to be in an interesting space and the currency looks ‘Bearish’ given the current price of USD 7.764 (as on September 29, 2022, at 08:10 AM, (GMT+1) Time in London, UK. However, volatility in the price should be borne in mind when looking at further evaluation for investment scenarios. Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while making investment decisions.

Related Risks: Based on the technical analysis, the risks are defined as per risk-reward ratio (~0.80:1.00), however, returns are generated within 1-2 weeks’ time frame. This report may be looked at from high-risk perspective and recommendations are provided are for a short duration. Recommendations provided in this report are solely based on technical parameters, and the fundamental performance of the cryptocurrency has not been considered in the decision-making process. Other factors which could impact the cryptocurrency prices include market risks, regulatory risks, interest rates risks, currency risks, social and political instability risks etc.

Note 1: Trend Indications

Bullish Trend is generally used in information services and financial reporting as a trend typified with an upward momentum in prices based on the market sentiments, overall price action, and technical analysis. Typically, Resistance Levels or Indicative Stop loss levels need to be evaluated for exit triggers. 

Bearish Trend is generally used in information services and financial reporting as a trend typified with a downward movement in prices based on the market sentiments, overall price action, and technical analysis. Typically, Support Levels or Indicative Stop loss levels need to be evaluated for exit triggers.

When we identify trends as ‘Bullish’ or ‘Bearish’ it is based on a technical analysis of the available data as we understand it and is not, and should not be considered as, either advice or a recommendation to buy, sell or hold the relevant cryptoassets.

Note 2: How to Read the Chart?

The Green colour line reflects the 21-period simple moving average (SMA) while the red line indicates the 50-period SMA. SMA helps to identify existing price trends and if the prices trade above the 21-period and 50-period SMA, then in general it shows an uptrend trend.

The Black colour line in the chart’s lower segment is a 14-period Relative Strength Index (RSI) which indicates momentum in trend. A reading of 70 or above suggests overbought status, while a reading of 30 or below suggests an oversold status.

The Blue colour bars in the chart’s lower segment show the volume of the Cryptocurrency. The volume is the quantity that changed hands during the given period. Cryptocurrencies with high volumes are more liquid compared to lesser once and higher volumes help in easier and faster execution of the order.

The Orange colour lines are the trend lines drawn by connecting two or more price points and used for trend identification purposes. The trend line also acts as a line of support and resistance.

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.

Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

A trailing stop-loss is a modification of stop-loss in case of favourable movement in the price to protect the gains. It is suggested to Trail the Stop-Loss as per the aforementioned levels if the Cryptocurrency price achieves more than 60% of the Resistance 1. individuals, in general, might consider exiting from the position as per the Trailing Stop-Loss level if the price starts moving downwards after achieving more than 60% of Resistance 1. However, these indications need further evaluation basis associated risks and any change in trends.

The reference date for all price data, currency, technical indicators, support, and resistance levels is September 29, 2022 at 08:10 AM, (GMT+1) Time in London, UK.  S&P Cryptocurrency BDM Index in this report has been sourced from REFINITIV.

Abbreviations

CMP: Current Market Price

SMA: Simple Moving Average

RSI: Relative Strength Index

USD: United States dollar

Note: This publication is for informational purposes only based on technical analysis and does not reflect the fundamental validity of the cryptoasset. It in no way constitutes investment advice or a recommendation to buy, sell or hold financial instruments. Trading decisions require a thorough analysis by investors taking account of a range of factors, including in relation to cryptoassets in themselves, general market trends and an investor’s own ability and appetite to take risks and bear losses.

Disclaimer

References to ‘Kalkine’, ‘we’, ‘our’ and ‘us’ refer to Kalkine Limited.

This website is a service of Kalkine Limited. Kalkine Limited is a private limited company, incorporated in England and Wales with registration number 07903332. Kalkine Limited is authorised and regulated by the Financial Conduct Authority under reference number 579414.

No information, whether oral or written, obtained by you from us or through or from the service shall create any warranty not expressly stated. Kalkine does not intend to exclude any liability which it is not permitted to exclude under applicable law or regulation.

Any information in this report relating to digital currency or other cryptoasset types (cryptoassets) is based on the law that applied at the time the report was prepared. The laws that apply to cryptoassets (and how a particular cryptoasset is regulated) may change. Investments in cryptoassets can be high risk and volatile. You should seek appropriate advice and consider your objectives and risk appetite before making any decision in relation to such products.

This publication does not offer financial advice based upon your personal financial situation or goals, and we shall NOT be held liable for any investment or trading losses you may incur by using any information contained in our publications, market updates, news alerts and corporate profiles. The information contained within this publication does not in any way endorse or recommend individuals, investment products or services for your personal financial situation. You should discuss your portfolios and the risk tolerance level appropriate for your personal financial situation with an authorised person specialising in advising on investments. You should be aware that the value of any investment is variable and can go down as well as up and you may not get back the amount invested.  Past performance is not indicative of future results. You should also be aware that most cryptoassets are not regulated by the FCA and are not protected under the Financial Services Compensation Scheme or the Financial Ombudsman Service. Further, Capital Gains Tax (CGT) may be payable on profits made from investing in cryptoassets.

On the date of publishing this report (referred to on the Kalkine website), employees and/or associates of Kalkine and its related entities do not hold interests in any of the cryptoassets covered on the Kalkine website unless those persons comply with certain safeguards, procedures, and disclosures.