Is Chainlink a Good Investment? (On Chain Data Analysis)

analysis Nov 05, 2022
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Wanna Know if Chainlink is a Good Investment?


Is Chainlink a good investment in 2023? Great question! To answer it, first we'll explore what Chainlink is and what it does in the current cryptocurrency ecosystem. Then, we'll analyze Chainlink's on-chain data and see if it paints a bullish or bearish picture of its future. Ready? Let's get started!


What Exactly is Chainlink Anyway?


Chainlink ($LINK) a decentralized oracle solution designed to enable smart contracts on various blockchain networks. The value of an oracle is its ability to provide data from the real world and link it to a smart contract. An oracle enables a smart contract to react to real-world events, as well as provide data that’s essential for making the contract useful in real-world scenarios.

Without an oracle, a smart contract can only react to events triggered by another party. This means that the scope of use cases for any given contract remains limited, which severely restricts the potential of blockchain technology and consequently hampers its adoption by businesses. As such, the demand for oracles has skyrocketed with the increased adoption of blockchain technology. This need for oracles is one of the reasons why we think Chainlink is a good investment.


Does Chainlink Have Competitors?


While Chainlink does have some competitors, it is the only platform that allows smart contracts to access off-chain data and services in a secure and reliable way. This gives it a significant advantage over its competitors. It is the oldest, most widely used, and trusted of all the oracle solutions, so it enjoys a significant first-mover advantage.

In addition, Chainlink has a strong team of developers and a growing community of users, which gives it a solid foundation for future growth. Finally, it has already been adopted by a number of major organizations, including Google, Oracle, and SWIFT, which gives it real-world utility and adds to its long-term prospects. These developmental milestones are also reasons why we think Chainlink is a good investment in 2023.


How is Chainlink Different From Other Cryptos? 


Chainlink is different from other cryptos in a few key ways. 

  • First, it is designed to be a decentralized Oracle network. This means that it can provide data to smart contracts on the blockchain, which is not possible with other cryptos. 
  • Second, Chainlink is scalable and can handle large amounts of data. This is because it uses a Proof-of-Stake consensus mechanism, which is more efficient than the Proof-of-Work mechanism used by other cryptos. 
  • Thirdly, Chainlink has a strong community and team behind it. This gives it a good chance of success in the long term.
  • Finally, Chainlink is a good investment opportunity. Unlike the majority of crypto tokens, $LINK has a real-world use case and a proven track record of success, which makes it stand out from its competitors and the majoroty of other cryptos out there.  


Is Chainlink a Good Investment? What Does the On-Chain Data Say?


(Note: Check out our on-chain metrics post to learn how to interpret them).


Let's examine 7 key on-chain metrics which will help us determine whether Chainlink is a good investment or not. If you want to know more about the software we are using for this analysis, please read our nansen.ai article.


On-Chain Metric #1: Smart Money Activity (30d)


Smart Money has been accumulating over the last 60 days = bullish


On-Chain Metric #2: Top Exchanges Inflow/Outflow (7d)


Top Exchanges showing higher inflow than outflow last 7 days = bearish


On-Chain Metric #3: Tokens on Exchanges (60d)


Tokens on exchanges showing sideways trend last 60 days = neutral


On-Chain Metric #4: Token Balances (Exchanges vs Dex Traders)


Exchanges > Dex Traders + no convergence/divergence = neutral


On-Chain Metric #5: Top Balances (30d Negative Change)


Top sellers keeping bags at 100% rate last 30 days = bullish


On-Chain Metric #6: Seniority Distribution


 Majority of tokens being held by long-term holders (1year+) = bullish


On-Chain Metric #7: Unique Addresses for Token


Unique address count showing steady long-term uptrend = bullish


So, is Chainlink a Good Investment or Not?


Well, $LINK scored a 5 out of 7 in our analysis of the current on-chain data. This is  considered a bullish rating. If we add this to the fact that $LINK has very strong fundamentals, and a proven track-record of delivering technology that actually works, we can assume that the future looks very bright for this project. We know the company has plans to continue expanding its partnership with various industries and to continue building integrations with popular blockchain networks. It has a strong team of developers and a passionate community. Chainlink has the potential to become the standard for data and information sharing in the blockchain space. So, yes, we think Chainlink is a good investment in 2023!