The Recent Plunge of Chainlink: A Cause for Concern or a Market Correction?
In late January 2026, Chainlink (LINK) experienced a significant decline, dropping 22% over just a few days. This sharp sell-off raised critical questions about the sustainability of its multi-month upward trajectory. The plummet broke through a previously strong support zone between $10.60 and $11.75, a range that had successfully held since mid-November 2025. This breakdown closely coincided with key Fibonacci Retracement levels, which are often watched by traders to identify price action and potential reversal areas. As Chainlink wrestled with these support levels, market participants began to assess whether this was merely a capitulation event or the onset of a deeper correction in a volatile cryptocurrency market.
The downturn in Chainlink’s price was not occurring in isolation; it occurred alongside a broader decline in the cryptocurrency market. Bitcoin’s price also fell below $85,000 during this tumultuous period, amplifying risk aversion among altcoin investors. The decline in LINK’s price brought its Relative Strength Index (RSI) to the lowest it had been since 2022—a critical signal that indicated oversold conditions and potential for a bounce-back. However, even amid the bearish sentiment, the market dynamics suggested contrasting narratives. Traders were caught in a dilemma, torn between the signs of capitulation and the unsettling prospect of a more profound market correction.
Interestingly, despite the sharp price drop, metrics indicated that buying pressure remained robust. Data from CryptoQuant revealed that even when Chainlink fell to $13 in November 2025, the Taker Buy Dominant metric continued to show strength. This reflects that a significant number of institutional investors still viewed LINK as undervalued, prompting continued accumulation while prices tumbled. This resilience in buying interest illustrates that Chainlink’s utility and potential are still on the radar of savvy investors, who remain optimistic despite the current market conditions.
Adding to the complexity of the situation, liquidity dynamics became crucial during the late-January sell-off. CoinGlass Liquidation Heatmaps illustrated that notable liquidity clusters developed between the $12 and $13 price points. Price action repeatedly interacted with this zone before stabilizing near the lower end, indicating a battle between buyers and sellers. A reclaim above the $11 mark could potentially attract liquidity flows that might lead to short-covering, offering a pathway back toward $13. Until that point is reached, sellers maintained control over the broader trend, creating an environment rife with uncertainty for traders.
Furthermore, a worrying trend emerged in Chainlink’s supply metrics. According to analysts at Glassnode, the total supply of LINK in loss spiked dramatically to approximately 400 million. This trend suggested that a significant portion of LINK holders found themselves underwater, a scenario not uncommon during market downturns. Historically, spikes in supply metrics have often indicated impending market bottoms and subsequent recoveries. For instance, during the 2022 market correction, a similar upsurge in Total Supply in Loss preceded a robust price recovery. Given Chainlink’s essential role in the blockchain landscape, these indicators could suggest that a price reversal might be on the horizon.
In conclusion, while Chainlink’s recent plunge below the $11 support level raises red flags, vital indicators continue to suggest that there could be underlying strength in the market. The Spot Taker CVD remained buy-dominant, and the growth in Total Supply in Loss often correlates with market bottoms. Despite the challenges faced, Chainlink’s integral role in the crypto infrastructure combined with sustained institutional interest indicates that this might be a pivotal moment for the asset. As traders and investors navigate through market complexities, they must remain mindful of these signals, which could ultimately inform their next moves in the evolving landscape of cryptocurrency.
