ChainLink (LINK), a top 12 cryptocurrency by market cap, has entered price discovery. It recently surpassed its previous record high achieved in June 2019 at $3.8.
Price discovery in trading refers to when an asset surges past its recent high, targeting a new all-time high.
Where is the limit for ChainLink cryptocurrency?
Traders rely on support and resistance levels to evaluate the price trend of an asset. When there are no support and resistance levels as a cryptocurrency’s price enters a new range that has not been tested before, both upside and downside movements can be exaggerated.
For instance, when the bitcoin price surpassed the $10,000 level in 2017, it took merely three weeks for the price to double to $20,000.
But, because no support levels existed above $10,000 as it entered price discovery, the correction was intense and it plummeted by more than 70 percent within a span of two months.
In that regard, while price discovery could allow a cryptocurrency like ChainLink to see an over-extended rally, it also makes it vulnerable to steep pullbacks in the short-term.
Cryptocurrency trader Josh Rager said:
“LINK Same as Tezos in price discovery. Can continue to pump but if it falls, LINK has limited support until under $3. I'd certainly start getting exposure by $2.84 and for some reason, if the price gets to $2.16, I'd buy more in that area.”
Traders remain cautiously optimistic on LINK and other cryptocurrencies that have entered price discovery like Tezos (XTZ), as they could demonstrate intense rallies off of the strength of bitcoin but can be exposed to sharp sell-offs.
Will bitcoin provide strength?
Typically, the alternative cryptocurrency (altcoin) market tends to prosper when bitcoin stabilizes and shows sideways price movement after a large upsurge.
As the momentum in the cryptocurrency market improves and bitcoin sees lower volatility, traders seek for higher-risk assets, turning to the altcoin market.
For cryptocurrencies like LINK, XTZ, and Ethereum to sustain their momentum after being the best performers in the recent rally, the bitcoin price has to defend key support levels.
At a macro view, top traders like Cred have noted that $9,550 remains as the break or make it level for the dominant cryptocurrency. If the bitcoin price closes its weekly candle on February 24 above $9,550, Cred explained that more upside movement heading into March is likely.
“Price up against Monday's high and current weekly open here at $9.9k. Again, as long as $9.5k weekly support and 1D bullish structure holds, I expect the party to rage on to the upside. $10.2k then $11k. Until $9.5k breaks on a 1D close, life is easier as a bull,” one cryptocurrency trader said.