I have been consistently positive on Chainlink (CCC:LINK-USD) cryptocurrency, especially now that it is way off its previous peak prices. For example, as of June 13, LINK crypto was at $23.28, off $28.92 from its peak on May 8 of $52.20. That represents a depressing drop of over 55% from the top.
But Chainlink’s performance does not look so bad from the beginning of the year. It closed out at $11.87 on Dec. 31, giving it a short-term unrealized gain so far (as of June 13) of $11.41 per LINK token. that means it’s up 96.1% so far this year. That is an excellent performance by any measure. The question is – can this continue through the rest of the year?
I think it can. The fact is, it appears that LINK crypto, along with other cryptos, appear to be close to a trough. I also think LINK crypto will closely follow whatever happens with Ethereum (CCC:ETH-USD). Here is why.
Why ChainLink Crypto Will Mirror Ethereum
First, consider the market capitalizations of both cryptos. Ethereum is the second-largest crypto, with a market value of about $290 billion as of June 13, according to Coinmarketcap.com. By contrast, Chainlink is the 14th largest cryptocurrency with a market cap of $10 billion. Therefore, the general direction that ETH crypto takes will tend to influence the positive or negative moves of LINK crypto.
Another reason is that Ethereum is seen as the father of smart contracts. As I wrote last month on May 17, Chainlink is now starting to develop and attract a number of smart contract apps. For example, Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) started using Chainlink as a smart contract platform in 2019. This garnered a good deal of attention for Chainlink, including from Forbes magazine, which said LINK provides “on-ramps and off-ramps” for smart contracts.
The Oracle Issue and LINK
This brings up the “oracle” issue with smart contracts. Chainlink is a blockchain technology that specializes in assisting Ethereum contracts and other smart contracts with third-party data integration (i.e., the “oracle” issue). As Cointelegraph describes Chainlink, it is a
“decentralized oracle network that allows public blockchains and smart contract platforms to bring external, off-chain data sources to on-chain operations with minimal trust in third parties.”
To better understand this oracle issue, read this excellent article about the blockchain oracle problem. This is the ongoing challenge of bridging real-world data such as market stats, event outcomes and even the weather to the blockchain.
LINK founder Sergey Nazarov has become known as the father of the smart contracts concept. What’s more, Nazarov believes the Defi market is already at $80 billion and poised for huge growth from here. In April 2021 he published a new whitepaper about how Chainlink will produce “hybrid” smart contracts. Here is what Decrypt magazine reported he said in an interview:
“Hybrid smart contracts are about combining blockchain smart contract application capabilities, and the off-chain world’s proof and data and computations.”
What To Do With LINK Crypto
Chainlink’s Sergey Nazarov also gave a very telling interview with Coindesk.com recently. In the interview, he explained how Chainlink aims to enhance its ability to feed external data into programmable smart contracts. This is its “oracle” technology for hybrid smart contracts which enhances smart contracts for which Ethereum is so well known.
One way it will do this is through “explicit staking” which adds a second layer of trusted oracles to supervise the network. The idea is to penalize malicious activity through loss of tokens and the future ability to make revenue.
As a result, Chainlink now looks like an up-and-coming crypto token. Expect to see it get integrated into more and more smart contracts, making its token look more valuable for the long term.
On the date of publication, Mark R. Hake held a long position in Ethereum (ETH) but no other security mentioned in the article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.