Chainlink (LINK) has been struggling in recent days, with its price experiencing a significant drop, signaling potential further downside in the short term. Following a 12% price decrease, the cryptocurrency has lost crucial support levels, which is raising concerns among investors and traders alike. The current market conditions indicate that Chainlink may face additional challenges, with another 10% drop potentially on the horizon.

Price Drop and Loss of Crucial Support Level

Chainlink’s recent price action has been bearish, with the token falling below the critical $14.85 support level. This level had been significant for long-term investors, as it was where 17,000 investors had accumulated over 73.5 million LINK tokens. Unfortunately, this support level has now been breached, leaving many investors facing losses. As of now, LINK is trading near $13.80, marking a sharp 12% decline in just 24 hours. The drop has resulted in a substantial shift in the market sentiment, with a large majority of LINK holders now seeing red on their positions.

According to on-chain analytics firm IntoTheBlock, only 24.96% of LINK holders are currently in profit, while the vast majority, around 74.74%, are at a loss. This significant shift reflects the broader downtrend in LINK’s price and suggests that many investors may be feeling the pressure of the market’s decline.

Decreasing Trading Volume and Bearish Momentum

Adding to the bearish sentiment, Chainlink’s trading volume has decreased by 15% over the last 24 hours, indicating lower participation from both investors and traders compared to the previous day. This drop in trading activity suggests a lack of confidence in LINK’s price recovery, with fewer traders willing to engage in the market under current conditions.

Technical analysis of Chainlink’s price action also points to further downside potential. LINK had been consolidating in a range between $15.85 and $14.85 for three days prior to its recent drop. Now that the price has broken out of this consolidation, the asset may be poised for more losses. If LINK fails to hold the $13.80 level and closes a daily candle below this point, it could fall to the next support level of $12.20, representing an additional 10% drop in the near future.

200 EMA and Market Sentiment

One of the key technical indicators that suggests continued bearish pressure is the 200 Exponential Moving Average (EMA). This is a widely used indicator that helps determine whether an asset is in an uptrend or downtrend. Currently, LINK is struggling to move above the 200 EMA on the daily timeframe, reinforcing the idea that the asset remains in a downtrend. If this pattern continues, the token could experience further price declines before finding any meaningful support.

Another significant factor contributing to LINK’s bearish outlook is the dominance of short positions in the market. According to Coinglass, traders betting on short positions have become increasingly dominant. These traders have amassed $10.16 million in short positions at the $14.82 price point, which is now an over-leveraged level. On the other hand, traders holding long positions have built only $4.26 million worth of positions at the $13 level, indicating that the majority of the market sentiment is now leaning bearish.

Over-leveraged Positions and Liquidation Risk

The over-leveraged positions of short traders may lead to further downward pressure on LINK’s price. If short traders begin to push the price lower, they could trigger a cascade of liquidations in long positions. This could further intensify the downtrend, pushing LINK’s price even lower. If the price drops below the $13 level, the next potential support zone could be around $12.20, signaling a 10% drop from its current trading price.

Conclusion: Caution for LINK Investors

In conclusion, Chainlink is facing significant bearish pressure, with key support levels breached and a majority of investors now in the red. The combination of decreasing trading volume, over-leveraged short positions, and technical indicators pointing to continued downside momentum suggests that LINK could experience another 10% drop in the near future. Investors should remain cautious and watch for potential liquidation risks that could further push the price down. Until there is a clear reversal in sentiment and price action, Chainlink remains vulnerable to additional losses.