Chainlink (LINK) Faces Supply Crunch: Bullish Breakout Ahead?

Exchange supply levels for LINK continue to decline, following the same movement that began a few years ago.

With profits and open interest at sky-high levels, will this ignite the next market upswing, or is there more to the story?

Exchange Reserves Drying Up

According to data from CryptoQuant as of the time of writing, the token’s supply levels on exchanges have dropped to 161.8 million, marking a multi-year trend that began in mid-2023, when the price was around $6 to $7.

Despite the dwindling supply levels, the asset has been steadily increasing, now up over 230% since the range from over two years ago.

The lower the availability for sale, the lower the pressure on the market. Additionally, dropping reserve levels of tokens on exchanges typically coincides with bull runs, as the limited supply can catalyze price jumps.

If LINK sees an increase in buying momentum, the reduced liquidity could set the stage for higher prices.

Profits Near Apex Levels

Glassnode’s Percent Supply in Profit chart also appears to support the bullish momentum, with data at press time indicating a significant percentage of holders in profit, nearly 90%, which coincides with the last rally in July.

This could be a bit of a warning sign for LINK investors, though. Such high percentages of traders sitting on unrealized profits could lead to price declines if they decide to take some money off the table. However, this hasn’t been the case for LINK so far, as the asset has maintained a relatively healthy profit-taking margin.

Booming Interest

Open Interest (OI), the metric that traces the total number of active long and short positions in derivatives markets, has also skyrocketed over the past year.

As of September 1, 2024, there was roughly $115 million worth of OI for the token, which has now exploded to over $1.2 billion, according to current data from Messari.

This aligns with the broader institutional and retail acceptance of Chainlink and its native token. The project behind LINK has tapped several key partnerships between Web3 and Web2, solidifying its spot as a key player in DeFi, which has helped capture investors’ interest.

The oracle service’s token is currently trading at around $23, according to data from CoinMarketCap. Negligible daily dip, compared to the 48% increase for the last month, and 118% for the year.