Chainlink
Chainlink is a project that wants to solve the communication between different smart contracts and external data. The problem for smart contracts is that they cannot yet communicate with each other or with other data and Chainlink wants to solve this. On their website you will find the phrase “Your smart contracts connected to real world data, events and payments”. Smart contracts are for example a contract between a buyer and a seller (agreement) and this is written in a code. It is a self-executing contract and you will find this on a decentralized network.
Smart contracts are not able to access data on their own, so they need a secure middleware. Chainlink wants to be a decentralized oracle network that is highly reliable and secure. It will give smart contracts a bidirectional capability, which means receiving external data inputs and sending outputs to other systems. This would mean that smart contracts are connected to the outside world and this is very important.
Chainlink can connect a lot of data in the online world. Examples are consumer payments, Web API’s (Application Program Interface), event data, payments created by banks, etc.
Chainlink solves a real world problem and shows a real use case
What is important when you consider investing in a cryptocurrency project, is that this project solves a real world problem in the business world. If it does it means it has a use case and this is a valid reason for an appreciation in its price in the future. Chainlink solves a problem and that is the functionality of smart contracts. As written above smart contracts are limited to what they can do. It cannot access external data for example. If smart contracts want a widespread adoption, it would need to communicate with data that is spread all around the world. Chainlink will let smart contracts and data connect with each other. As an example to illustrate the use of Chainlink I will have a smart contract created that will be a bet with a friend. Bitcoin is right now at 7500 $ (at the time the smart contract is created). I believe Bitcoin is going to 10K from 7.5K and my friend believes BTC will go from 7.5K to 5K. We are going to create a smart contract (agreement) that will state that if BTC goes to 10K from 7.5K, I will win the bet and my friend has to pay me 1 BTC. On the other hand if BTC goes down from 7.5K to 5K, I have to pay my friend 1 BTC. The smart contract is created now, but since it cannot connect with external data, it will never know where the price of BTC is going in the near future. Now when we use Chainlink, it will connect external data and lets the smart contract know where the price of BTC is. The smart contract will now know what to do and will execute once BTC either hits 10K or 5K.
This example is obviously not very important for business matters, but you can imagine what Chainlink can do when it comes to connections between smart contracts and external date like bank payments and retail payments. Chainlink is a vital component to the eventual success of smart contracts and will get used in the future.
Chainlink weekly chart
I like to look at weekly charts for longer term views. Chainlink has not been around all that long and this hampers in some way the weekly chart, but I can still see some interesting points.
Here is the weekly chart of Chainlink compared to Tether US on Binance. Looking at volume you can clearly see a rise in the last 7 to 8 weeks and this is good news. Chainlink dropped heavily like all the other cryptocurrencies and the stock markets during the “black swan” event (coronavirus). This volume was the highest and has created a lot of fear and shaking out of weaker hands. A very interesting point is the weekly candle after this big drop and the big green candle three weeks after that. A lot of people will say that the bigger volume was during selling and not buying, but that does not show the complete picture. The big drop in this case and circumstance is obviously met with high volume. The week after that we still see very high volume but the candle only closed a little bit lower than the big drop candle close. This means there was heavy demand/buying volume around this area and thus support on Chainlink. The big green candle we see was met with equal volume and this time price went up a lot faster. This means that their was not a lot of supply left (weak hands were most likely already shaken out after the big drop). By the way you can also see the pink arrow and the candle showing a trend reversal was coming (inverted hammer) !
I have drawn a channel with a red line in the middle. The green line at the bottom supports quite nicely the price of Chainlink every time it meets this line. On the upper side you can see some touches as well. The red line is kind of the middle line for me. Above it would be bullish and under it more bearish. Chainlink is trying this week to close above it and that would be nice !
Price for Chainlink in near future
Chainlink decoupled of Bitcoin in 2019 and performed very well. However I do believe that lately it is following Bitcoin again (coronavirus and the fear in all the markets), so when I look at the future price of Chainlink, I also watch the movements of Bitcoin. Bitcoin has been showing very impressive On Balance Volume and price is finally trying to go towards it. We are trying to hold the 7500 $ level and if On Balance Volume (indicator) is to be believed we should rise further in the upcoming weeks. This would equally mean that Chainlink is going to rise as well in value. I am looking at the 4,60$ level, the 4,87$ level and around the 5,37$ level (top of the channel) for now. If in some way we were to break down in the crypto market I see levels of 3,34$, 2,95$ and 2,00$. These would most likely be great buying opportunities for a long term LINK hold.
Conclusion
If you believe smart contracts are going to play a vital role in the business world (digital), then you should consider investing in Chainlink. They will play a very important role and smart contracts rely for now on a project like Chainlink. We have already seen a big spike in the price of LINK from around 0,50$ to 5$ (10x !) and a lot more is to come if smart contracts become successful. Chainlink holds the 11th place on Coinmarket.com with around a 1.3 billion market cap. LINK deserves to be in top 10 already in my opinion and in the future (years from now) I would not be surprised if it goes towards the top 4 of cryptocurrencies. Many analysts believe we will see trillions in total market cap for cryptocurrencies in the upcoming years and Chainlink can definitely get a good chunk of it. Do not be surprised if it surpasses the 250 billion market cap at that point !
This is not financial advice and I am not a financial advisor. Do your own research and make your own decisions.
