Chainlink (LINK) experienced a notable pump on Sunday, March 2, following the announcement of a U.S. strategic crypto reserve. However, the bullish momentum was short-lived as macroeconomic factors, including new tariffs on Mexico, Canada, and China, contributed to a broader market decline. The Dow Jones Industrial Average dropped by 2.53% from Monday’s highs, dragging the cryptocurrency market down with it. As a result, LINK retraced its weekend gains, mirroring Bitcoin’s (BTC) downturn.
On-Chain Metrics Signal Shifting Sentiment
Despite the retracement, long-term metrics provide a more nuanced outlook for LINK holders. The Network Value to Transactions (NVT) ratio, a key valuation metric, recently trended higher, indicating a potential overvaluation. A higher NVT suggests that the market cap is disproportionately high compared to the on-chain transaction volume, similar to an inflated price-to-earnings (P/E) ratio in traditional stocks.
In September 2024, LINK’s NVT reached its highest level since January 2020 due to a drop in on-chain transaction volume. This metric saw a temporary decline during the November-December 2023 rally, but with trading enthusiasm cooling off, LINK’s NVT is once again on the rise. This suggests that while investor interest has waned, LINK’s market cap remains relatively elevated.
MVRV and NUPL Indicate Profit-Taking Opportunities
The Market Value to Realized Value (MVRV) ratio currently stands at 1.29, implying that LINK holders, on average, are still in profit. However, this figure remains well below the highs seen in 2020 and 2021. Given the expansion of the altcoin market, LINK may struggle to achieve the same profit margins seen in previous bull cycles.
Additionally, the Net Unrealized Profit/Loss (NUPL) metric suggests a shift in sentiment. At a value of 0.18, LINK holders are experiencing significantly fewer unrealized profits compared to the December peak of 0.62. This downward trend indicates growing investor caution, potentially signaling that profit-taking may be a prudent strategy if a reversal occurs.
Also Read: Crypto Market Plunge: Bitcoin Drops Below $87K, Chainlink Faces Key Support Levels
Outlook for LINK Investors
While Chainlink’s retracement aligns with the broader market correction, on-chain metrics suggest that investors should be cautious. With NUPL trending lower and MVRV still in profit territory, profit-taking could be a strategic move before further downside risk materializes. If LINK’s on-chain volume recovers, a more sustained bullish trend may emerge, but for now, investors should remain vigilant amid macroeconomic uncertainties.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of CoinBrief.io. Before making any investment decisions, you should always conduct your own research. Coin Brief is not responsible for any financial losses.
