After the remarkable runup in cryptocurrencies where seemingly every day that passed delivered some crazy record, the sector is getting its first real taste of a correction. While proponents are eagerly grabbing bitcoin (CCC:BTC-USD) at a relative discount, those on the sidelines have been eyeballing alternative cryptocurrencies (altcoins) like Chainlink (CCC:LINK-USD). While it doesn’t quite have the cachet of BTC, Chainlink coin may be one of the surprising wagers of 2021.
Currently, LINK has several psychological and administrative features that support a bullish thesis.
First and foremost, Chainlink coin is priced right. For newcomers to virtual currencies, the market has an extreme dichotomy. On one end of the scale, you have bitcoin and its five-digit price, followed by ethereum (CCC:ETH-USD) with its four-digit price. You have a few with three digits, then the rest are priced like penny stocks.
Though it’s not how you should exclusively assess any investment, Chainlink coin seems meaty enough at around $14 to $15, ranked 10th in market capitalization. Yet it’s also low enough that newcomers feel they are getting a solid deal.
The Robinhood Era
While this might seem like a ridiculous talking point, remember, we’re living in the Robinhood era. Like it or not, psychological dynamics play a big role in what young or inexperienced traders end up acquiring.
Another factor that shouldn’t be ignored is that Chainlink coin is offered on Coinbase, one of the world’s most popular crypto wallets/trading apps. Invariably, if you’re an American investor looking to get your feet wet with virtual currencies, Coinbase is the place to go.
As well, many if not most cryptocurrencies tend to trade in sympathy with bitcoin. While that’s not always the case, it’s true enough that, at the right time, buying something like Chainlink coin is akin to buying bitcoin at $15.
Remember, at one point, bitcoin was so cheap that it required 10,000 units to buy two pizzas. That kind of dream payout keeps the blood flowing in the altcoin sector.
While probably the majority of blogs featuring Chainlink coin will discuss its profitability potential, that upside is backed by intriguing fundamentals. As virtual currencies begin to integrate more deeply in the mainstream, the usability of altcoins such as LINK may take precedence.
To understand why, let’s back up for a moment.
Bitcoin today is considered a digital safe haven. When it first launched more than a decade ago, it was a proof of concept. Essentially, bitcoin and the underlying blockchain technology proved that you could create a digital currency of true economic value and trust without the need of a centralized (human) intermediary.
However, the programmer(s) behind bitcoin never envisioned that it would take off like it did.
Some of the flaws of the bitcoin architecture were exposed as more people engaged its blockchain network. As a result, alternative blockchain projects sprouted, each proclaiming to address a solution for specific problems, such as cheap, lightning-quick microtransactions.
From this synergy of innovation came ethereum, which forwarded the concept of the smart contract. Long story short, smart contracts enable the creation and execution of deals without involving third parties. Thus, expensive intermediaries (such as attorneys) could be phased out for certain transactions.
However, the practical limitation of ethereum-based projects is that many contractual events occur outside the blockchain, such as betting lines on a football game. To connect the blockchain with the real world requires a bridge of some sort, called an “oracle” in blockchain parlance. The underlying business of the Chainlink coin is exactly that: an oracle network that connects smart contracts with real-world data.
Now, this sounds like a lot of nerd talk. However, it has serious implications for burgeoning markets like online gambling. Once global economies normalize, the sheer volume of gaming participants could require robust artificial intelligence platforms. Blockchain and oracle networks could provide the fuel to support this innovation. This is why the smart money – including our own Matt McCall – have long been bullish on LINK.
And Yes, the Technicals Are Enticing
Of course, the narrative above may take some time to play out. And let’s be honest – the immediate reason why people are interested in Chainlink coin is its upside potential.
If you’re on that boat, you should be aware that LINK has a strong correlation with bitcoin. When you average out the pricing on a quarterly basis, the two crypto assets share a nearly 83% correlation coefficient.
Basically, as one goes up, so does the other – but it applies in the other direction as well.
On a day-to-day basis, the correlation weakens to about 66.2%. Nevertheless, much of that is caused by the daily wildness of the crypto market. If you’re interested in holding Chainlink coin for the long term, the 83% correlation is more reflective of its relationship with bitcoin.
Still, you saw what happened with BTC a few days ago. This is a market where you can gain tremendous wealth and lose it within a 24-hour cycle. And this magnitude is much more heightened with an altcoin like LINK. However, if you can handle the risk, there’s much more to Chainlink than its speculative potential.
On the date of publication, Josh Enomoto held a long position in LINK, BTC, and ETH.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.
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