Chainlink (LINK) has been a star performer in the cryptocurrency market since September, outpacing Bitcoin (BTC), Ethereum (ETH), and many other altcoins. However, the current month has not been as kind to LINK, as it has faced a 10% correction in October. This has left investors concerned that the support level of $7.20 may break, potentially erasing all the gains made in the previous month.
Despite the recent downturn, it is important to consider the overall performance of Chainlink. In September, the price of LINK surged by an impressive 35.5%, reaching its highest point in over 10 weeks with a closing price of $8.21. However, when taking a broader perspective, Chainlink’s price is still 86% below its all-time high in May 2021. Additionally, while other cryptocurrencies like Ether (ETH) have seen significant growth over the past year, LINK has shown little progress, gaining only 21.5% in the same period.
One of the driving factors behind Chainlink’s bull run was a report released by SWIFT, the leader in messaging for international financial transactions. The report titled “Connecting Blockchains: Overcoming Fragmentation in Tokenized Assets” suggested that linking existing systems to blockchains is more feasible than unifying different central bank digital currencies (CBDC). SWIFT emphasized the use of Chainlink’s Cross-Chain Interoperability Protocol (CCIP) to connect multiple networks and reduce costs for institutions supporting tokenized assets.
This endorsement from SWIFT was followed by another positive development when the Australia and New Zealand Banking Group (ANZ) successfully tested Chainlink’s CCIP solution for their Australian dollar stablecoin. ANZ described this transaction as a milestone moment, highlighting their belief in the value of tokenizing real-world assets and the potential to revolutionize the banking industry.
On September 21, Chainlink announced the mainnet launch of CCIP protocol on the Ethereum layer-2 protocol Arbitrum One. This integration allows access to Arbitrum’s high-throughput, low-cost scaling solution, which can drive cross-chain decentralized application development. Despite these achievements, Chainlink faced criticism when user @StefanPatatu called out the project for quietly reducing the number of approvals required on its multi-signature wallet. This change, which was viewed as a security measure, raised concerns about the potential risks if Chainlink’s signers were to act maliciously.
Chainlink responded by downplaying the concerns and stating that the update was part of a regular signer rotation process. However, the criticism from crypto analyst Chris Blec still lingered, expressing concerns that the entire decentralized finance (DeFi) ecosystem could be destroyed if Chainlink’s signers were to go rogue.
One of the key metrics for Chainlink is the revenue generated by its price feeds. However, this metric has been in decline for the past four months when measured in LINK terms. In September, Chainlink price feeds generated 142,216 LINK in fees, a 57% drop compared to May. While some of this decrease can be attributed to the decline in Ethereum’s total value locked (TVL), it does not account for the entire difference. This raises questions about the sustainability of Chainlink’s revenue model.
It is worth noting that Chainlink offers various services beyond price feed generation and operates on multiple chains, including CCIP. However, Ethereum’s oracle pricing services remain the core of the protocol’s business. This stands in contrast to Uniswap (UNI), the leading decentralized exchange, which has a lower market capitalization than Chainlink but generates significantly more fees and boasts higher total value locked.
The current pressure on Chainlink’s price and the uncertainties surrounding its revenue model have left investors questioning whether the project can maintain its support level and market capitalization. While Chainlink has achieved notable partnerships and successes, there are valid concerns that need to be addressed.
As the cryptocurrency market continues to evolve and mature, projects like Chainlink will need to adapt and showcase their ability to overcome challenges. Only time will tell if Chainlink can rise to the occasion and secure its position as the leading decentralized blockchain oracle solution.