Journalist
Posted:
- Chainlink noted a discrepancy between the NVT and price developments in November.
- This indicated a robust user base and could pave the way for further price gains.
Chain link [LINK] has been trading on a higher time frame since November. However, the price staged a strong rally earlier in October.
Despite these gains, the network value-to-transaction ratio has been declining since September.
This suggested that user acceptance was likely high. To find out why, AMBCrypto looked at other on-chain metrics. Another question of whether the LINK token was undervalued also arose.
What is the NVT and why is it important?
The Network Value to Transactions ratio, or NVT ratio, is a statistic that is available on Glassnode, among others. It is calculated by dividing the token’s market capitalization by the volume transferred on-chain, measured in USD.
The seven-day moving average of this ratio trended downward from September 17 to November 12. Since then, the ratio has slowly moved higher. During this time, Chainlink began a rapid rally.
Source: Glass junction
At the time of writing, the price was trading within a range of $13.3 to $16.6. The declining NVT ratio and rising prices ensured strong user adoption. It also pointed to the possibility that the token was undervalued.
To investigate this further, AMBCrypto looked at other relevant metrics as well as LINK’s price action.
What do user adoption and increased transactions mean?
The Chainlink investor who holds LINK for the long term is probably feeling good. The token has performed remarkably well since September, even though it has been trading within a range for the past six weeks.
AMBCrypto analyzed Santiment’s data and noted that development activity has slowly trended lower in December. T
Given the start of the holidays, this was not a major concern. Social volume rose rapidly until mid-December, but began to decline in the past two weeks.
Source: Santiment
Transaction volume saw sharp upward peaks, but the lows it formed were much higher compared to late September. Active addresses rose higher from September to mid-November.
Interest rates also spiked higher in the first half of December. Taken together, these metrics indicated increased network activity and adoption.
Interestingly, at the time the NVT ratio was falling and the price was rising in early November, the MVRV ratio shot higher. This showed that the asset may have been overvalued.
However, the MVRV has again fallen towards zero, even as LINK continued to consolidate. This could be bullish for the token in the coming months.
Source: LINK/USDT on TradingView
The price chart showed the aforementioned range formation in purple. The $15 level acted as a mid-range support/resistance level.
It was also an important higher time frame level. The RSI on the 12-hour chart stood at 53, after falling to 38 on December 13.
Read Chainlink’s [LINK] Price forecast 2023-24
LINK was again above $15 and is expected to rise to the high range of $16.6. Yet the OBV failed to rise above an important local highlight.
Once this happens, it implies that buyers were back in control and would be in a position to force a breakout beyond $16.6.
