Chainlink’s Bullish Momentum Complicated by Rising NVT Ratio Suggesting Possible Overvaluation Risks

• Chainlink’s recent performance has stirred discussions among investors, fueled by significant developments in its market structure and on-chain metrics.

• Despite a bearish overall market sentiment, Chainlink has shown signs of recovery, raising questions about its future trajectory amid accumulating interest.

• As noted by leading analysts, “The recovery could turn into an uptrend that may push Chainlink’s value beyond $31.”

Explore Chainlink’s price recovery and market insights as the NVT ratio signals caution amidst growing on-chain activity and investor interest in LINK.

Chainlink’s Bullish Market Structure Signals Potential Upswing

Chainlink [LINK] recently flipped its daily market structure bullish, surpassing the key resistance level of $23.83 on January 17. This upward movement indicates a resurgence of demand and a positive shift in market momentum, suggesting that traders are increasingly confident in the coin’s potential for further gains. Notably, the retesting of the 61.8% Fibonacci level serves as a technical foundation for this bullish outlook.

Distribution of Daily Active Addresses Exhibits Recovery

In the face of recent market volatility, the daily active addresses for Chainlink users have signaled an increasing trend. Data shows a peaking activity in December, coinciding with prices nearing the $30 mark. Although this level was not maintained, the return to mid-December levels in early January points to a resilient user engagement.

Source: Santiment

NVT Ratio: An Indicator of Potential Overvaluation

The growing Network Value to Transactions (NVT) Ratio has raised concerns among investors about Chainlink’s current valuation. With the NVT indicating a disparity between on-chain transaction volumes and market cap, many analysts caution that LINK could be approaching overvaluation, evidenced by a sustained increase in the NVT ratio. This could signal a need for cautious trading strategies.

Source: Glassnode

Conclusion

In summary, while Chainlink is showcasing a bullish market structure with growing user engagement and a recovery in development activity, the rising NVT ratio indicates potential caution regarding overvaluation. Investors should remain vigilant, balancing optimism with prudent risk management as the market evolves.