by | Aug 18, 2020 | Bitcoin IRA

Chainlink (LINK) is one of the most talked-about cryptocurrencies of 2020. And for a good reason. LINK is the biggest crypto success story of the year so far, starting the year at approximately $1.75 and reaching an all-time high on August 15 at over $19 per token. 

As LINK continues to reach new heights, many crypto investors and enthusiasts alike have asked me whether Chainlink is a good investment in 2020. In this article, I’ll tackle that question by providing my best judgment on Chainlink’s price movements for the remainder of the year.

 

What Is Chainlink (LINK)? 

You can’t make a Chainlink price prediction without first explaining what makes the technology unique and why the project has a viable position as a crypto asset. Chainlink was created in 2017 by fintech company SmartContract Chainlink Limited and is headquartered in Grand Cayman, Cayman Islands. 

Chainlink was created to make it easier for banks, payment systems, and other blockchains to connect to blockchain and smart contract networks. In other words, Chainlink is a middleman software solution that makes smart contract applications on any blockchain interoperable. 

Currently, LINK ranks as the fifth-largest cryptocurrency by market capitalization. At the time of writing, LINK has a market cap of $7.3 billion. As demonstrated by the chart below, LINK has experienced significant upward price movements over the last 12-month period. LINK began its current rally in earnest on July 29, when the value of the cryptocurrency more than doubled in value over the following two and a half weeks. 

Source: CoinGecko

 

Is Chainlink All Hype?

Chainlink is a legitimate blockchain project and one that has deservedly garnered much fanfare over the past year. However, there’s reason to doubt whether the technology’s hype matches its true potential as a be-all-end-all middleware solution. 

The predictions regarding Chainlink’s price ceiling range between $50 and $2,000. At this time it’s unclear whether the fundamentals of LINK support such a high ceiling. As we explain below, Chainlink may solve a legitimate problem that hinders blockchain’s mass adoption. However, we’ve yet to see any proof that Chainlink’s decentralized network is the missing piece we need to execute smart contracts on a one-size-fits-all oracle. 

Chainlink has partnerships with major institutional players. For instance, Google Cloud is using Chainlink’s oracle middleware to integrate Ethereum smart contracts on its platform. Similarly, Oracle Cloud is integrating Chainlink into its Oracle for Startups solution. 

There’s great upside potential to Chainlink, especially if large multinationals such as Google and Oracle are getting on board. But it bears mentioning that there is very little in the way of evidence to support the speculative frenzy and craze that has driven LINK’s recent surge through July and August.

 

Short Sell or Long Hold

As LINK’s exponential growth continues into late summer, some analysts and blockchain experts are becoming increasingly skeptical regarding the bull run’s longevity.  Technical analysis organizations such as Santiment have expressed concern that a prolonged rally is unsustainable. 

LINK has proven itself to be a highly volatile token. During March’s Black Thursday selloff, Chainlink lost nearly half its value, dropping from $3.82 to $2.06 between March 12 and 13. Since that time, the token has skyrocketed 983%. It remains anyone’s guess whether the token is headed for a course correction or a selloff. However, strong investor enthusiasm and high Chainlink price predictions support the notion that LINK is an asymmetric investment opportunity with far greater upside potential than downside risk. 

 

The Value Proposition of Chainlink

Blockchain tokens like Ether (ETH) function well as currencies and smart contract executors because they are immutable, public, and automatically executable. The downside is that blockchain networks are only operable with tokens and other blockchain-based assets. 

The value of Chainlink is in tying blockchains to real-world, non-blockchain entities such as fiat currencies and APIs via a trustless system. As a transparent public ledger, Chainlink lets businesses on the network successfully execute deals in the open without getting double charged, scammed, lied to, or stolen from. Currently, companies spend millions on establishing trust and protections between contracted parties—with Chainlink, there’s no need to devote as many resources to building trust between peers. 

LINK is the token that users on the blockchain exchange to pay for services on Chainlink’s decentralized oracle network. As Chainlink’s oracle grows in popularity, the demand for LINK will increase in step. 

There are still some unresolved questions, however, regarding the viability of such a project. For instance, what happens is the Chainlink oracle goes down? Further, what if a user’s single API goes down mid-transaction? The basic premise of Chainlink is that instead of trusting one centralized intermediary to execute a smart contract, you’re trusting several users (nodes) on the network to minimize risk and eliminate single points of failure. We’ve yet to be provided with a compelling argument suggesting why trusting several random, unvetted users is superior to trusting one vetted, centralized intermediary application. 

 

Our Verdict

There’s no denying that Chainlink provides real value, despite the open questions that hang over its underlying technology. Like most blockchain projects and ICOs, Chainlink price is subject to inflation via internet hype. Although LINK is supported by a strong user base and increasing institutional adoption, the project is certainly driven by a speculative bubble.

All signs point toward Chainlink being a reliable hold throughout 2020 due to its asymmetric upside potential. As it stands, investors have more to gain than they do to lose by investing in LINK, which boasts solid fundamentals and a development team dedicated to facilitating mass public adoption.

To protect your cryptocurrency investment gains, don’t forget to invest within a tax-advantaged, self-directed IRA. You can get started by checking out our cryptocurrency IRA reviews to find a trusted vendor for investing in LINK, Bitcoin, Ethereum, and other digital assets within a tax-sheltered environment.

 

Amine Rahal