Chainlink (LINK) Supply Hits Two-Year Low, Setting Stage for Potential Rally Beyond $40

Chainlink (LINK) is capturing significant market attention as its exchange reserves reach a two-year low, fueling speculation of a potential price surge beyond the $40 mark. This emerging supply shortage is creating bullish momentum for the cryptocurrency, with analysts pointing to a strong foundation for further upward movement.

LINK's Current Market Performance

As of November 2 at 2:35 p.m. local time, CoinMarketCap data shows Chainlink trading at $22.68, reflecting a 6.62% gain in just 24 hours. The token was trading near $20 in late October but managed to push past the $22 resistance level during Thursday’s trading session. This recent price movement signals a possible breakout scenario for LINK amid tightening market conditions.

Supply Constraints Drive Market Dynamics

According to on-chain analytics platform CryptoQuant, Chainlink’s exchange reserves have plummeted from 198 million tokens at the start of 2023 to approximately 145.4 million by late September. This marked reduction represents the lowest level of LINK supply on exchanges in two years. The sustained withdrawal trend has effectively created a supply squeeze, which is contributing to the token’s upward price trajectory.

In addition to the shrinking supply, daily trading activity for Chainlink has been surging. Over the past 24 hours, trading volumes have risen by 27%, amplifying the market’s bullish sentiment. Despite the rally, the token is currently facing resistance at its 50-day Simple Moving Average (SMA) of $23.46, while maintaining stability above the longer-term 100-day and 200-day SMAs.

Technical Analysis Signals Further Growth Potential

Technical indicators further underscore the likelihood of additional price gains for LINK. With a Relative Strength Index (RSI) reading of 49.74, Chainlink is positioned in a neutral zone, offering considerable room for upward momentum before hitting overbought conditions. Simultaneously, the derivatives market is showing increased speculative interest. Data from Coinglass reveals that open interest in LINK futures has climbed by 6% over the past day, reaching $1.35 billion. Major exchanges like Binance and Bybit have reported open interest gains ranging between 3% and 7%, reflecting a surge in trader confidence.

Prominent crypto analysts are also contributing to the optimistic outlook. Ali Martinez highlights that Chainlink’s resilience at the critical $20 support level indicates the potential for the token to target $47 in the near term. Michaël van de Poppe echoed similar sentiment, emphasizing that LINK has entered a “high-level support zone” and could see a rally toward new all-time highs (ATH) if it maintains levels above $20.

Factors Supporting a Bullish Outlook

The combined factors of reduced exchange supply, escalated trading activity, and a growing derivatives market underscore a robust bullish case for Chainlink. While the immediate resistance at $23.46 may present a short-term challenge, the overall market dynamics suggest that Chainlink is well-positioned for significant price appreciation.

Looking ahead, analysts remain optimistic about Chainlink’s mid-to-long-term potential to break past its previous ATHs, with several pointing to the $40 mark as a key milestone before potentially targeting $47. As supply constraints continue to tighten and investor sentiment remains positive, Chainlink’s upward trajectory appears well-supported by both technical and fundamental market indicators.