Chainlink (LINK)’s 35% rally was just a buy rumor, sell news event?
Chainlink (LINK) has gained more than 25% since September, outperforming Bitcoin (BTC), Ethereum (ETH) and most altcoins. Currently, the project is a decentralized blockchain oracle solution and is ranked 15th in market capitalization excluding stablecoins.
In September, LINK's price increased by an impressive 35.5%, but month-to-date performance in October, LINK faced a correction of 10%. Investors are concerned that a break of the $7.20 support level could lead to further downward pressure, potentially erasing all gains from the previous month.
It's worth noting that the September 30 closing price of $8.21 marked a more than 10-week high, but looking at the bigger picture, Chainlink's price is still 86% below its May 2021 all-time high. Over the past 12 months, LINK has seen little growth, while Ether (ETH) has gained 21.5% over the same period.
The LINK crew put all their hopes on the Swift test
The LINK bull run started SWIFT, the leader in messaging for international financial transactions, released a report on September 31 titled “Linking Blockchains: Overcoming Disruption in Tokenized Assets” linking existing systems to blockchains is more efficient than integrating different centers. Bank Digital Currencies (CBDC).
After a series of tests, SWIFT reported its ability to provide a single access point for multiple networks using existing infrastructure. This system is based on Chainlink's Cross-Chain Interoperability Protocol (CCIP) and is said to significantly reduce operational costs and challenges for institutions supporting tokenized assets.
Part of the rise in Chainlink's value can be attributed to the Australian and New Zealand Banking Group's (ANZ) successful testing of the Australian dollar stablecoin using Chainlink's CCIP solution. In a statement on September 14, ANZ described the transaction as a “pivotal moment” for the bank. ANZ banking chief executive Nigel Dobson said ANZ sees “real value” in tokenizing real-world assets, a move that could transform the banking industry.
On September 21, Chainlink announced the mainnet launch of the CCIP protocol on Ethereum Layer-2 protocol Arbitrum One, which aims to drive cross-chain decentralized application development. This combination provides Arbitrum with a high-volume, low-cost scaling solution. StarWare, another prominent Ethereum scaling technology company, has previously used Chainlink's Oracle services.
Chainlink's multi-sig changes and decreasing protocol fees have dampened investor interest
However, the positive news flow was interrupted on September 24 when user @StefanPatatu called out Chainlink on the X social network (formerly Twitter) for quietly reducing the number of verifications required on multi-signature wallets. The previous arrangement, which required four out of nine signatures to authorize a transaction, was seen as a security measure.
Chainlink responded by downplaying the concerns and explained that the update was part of the normal signer rotation process. This explanation did not negate crypto analyst Chris Blake's criticism that “the entire DeFi ecosystem could be deliberately destroyed in the blink of an eye” if Chainlink signatories were “rogue”.
However, ChainLink's most important metric, the protocol revenue generated by its feed, has been declining for the past four months as measured by LINK.
In September, Chainlink price feeds generated 142,216 LINK per payment (equivalent to $920,455), a 57% decrease compared to May. As part of this movement, Ethereum's total value locked (TVL) dropped from $28 billion in May to $20 billion, representing a 29% decline. However, this does not account for the overall difference, and may cause investors to question the sustainability of Chainlink's revenue model.
Related: JPMorgan launches token platform, BlackRock among key clients – Report
It's worth noting that Chainlink offers a variety of services beyond price feed generation and operates on multiple chains, including CCIP, although Ethereum's verbal price determination remains the core function of the protocol.
In comparison, Uniswap ( UNI ), a decentralized exchange, has a market capitalization of $2.38 billion, which is 42% smaller than Chainlink's. Uniswap generated $3 billion in total value locked (TVL) and $22.8 million in payouts in September alone, Defillama said.
As a result, investors have reason to question whether LINK can maintain the $7.20 support level and maintain its $4.1 billion market capitalization.
This article is not intended for general information purposes and should not be construed as legal or investment advice. The views, ideas and opinions expressed herein are solely those of the author and do not necessarily represent the views and opinions of Cointelegraph.
