Chainlink is seeing gains shrink, as it declines alongside major cryptocurrencies with rising volatility on Wednesday.
The technical structure of LINK remains fragile, highlighting the continued decline in open interest.
A 15% drop in LINK's price remains in place as bears tighten their grip below the 200-day exponential moving average.
Chainlink ($LINK ) continues its decline, trading above $18.00 on Wednesday amid volatility in the broader cryptocurrency market. Since Monday, the token has lost 10% of its value, reinforcing the prevailing bearish outlook.
If the bulls remain on the sidelines, ignoring buying opportunities on the dip, Chainlink risks extending the bearish leg by 15% towards $15.00. The fragile retail market, along with extreme volatility, is likely to keep LINK's price suppressed for longer than expected.
Continued decline of Chainlink amid weak derivatives
Chainlink faced the largest leverage reduction event in history on Friday, with a total of $167 million wiped out in long positions and about $16 million in short positions.
Despite liquidations having significantly decreased over the past few days with price stabilization, prevailing volatility could lead to further losses as Chainlink retreats.
Chainlink filtering data | Source: CoinGlass
Traders in the derivatives market remain on edge following recent sell-offs, as evidenced by a slight increase in open interest in futures (OI) to around $737 million, followed by a smaller correction to $704 million. Open interest had fallen to $704 million on Friday. If risk-averse sentiments continue and open interest declines further, it will strengthen a bearish grip and increase the likelihood of LINK's price slipping towards $15.00.
Open interest of Chainlink futures | Source: CoinGlass
Technical outlook: LINK swings amidst bearish signals
Trading $LINK above $18.00 at the time of this report on Wednesday, supported by widespread declines in the cryptocurrency market. The token's position under the 200-day exponential moving average at $19.08, the 100-day exponential moving average at $20.59, and the 50-day exponential moving average at $21.40 suggests that bearish sentiment remains entrenched and may continue in the coming days.
The sell signal maintained by the Moving Average Convergence Divergence (MACD) on the daily chart since Friday indicates a push by investors towards risk-averse sentiments.
The downward-moving Relative Strength Index (RSI) at 38 indicates that bearish momentum is increasing. If the current technical outlook persists, LINK could extend the bearish leg towards support at $15.00, which it previously tested in early August.
Daily chart of LINK/USDT
However, it may be too early to dismiss a potential recovery above $20.00, which would be bolstered by investor buying on the dip. Key milestones for Chainlink include a breakout above the 200-day exponential moving average at $19.08, the 100-day exponential moving average at $20.59, and the 50-day exponential moving average at $21.40.
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