Is Chainlink Overvalued?

Reading Time: 3 minutes

Chainlink (LINK) is one of the top performers of any asset class in 2020. In January, LINK was trading at $1.76, and as of July 16th, it had hit a high of $8.79, representing gains of 399%. After such massive gains, it is only natural for an investor to wonder whether Chainlink is still a good buy. Such concerns can be elevated by LINK’s current drop in value while Bitcoin surges past $10500. Despite such short term price fluctuations, Chainlink has a number of underlying strengths that could see it keep gaining in value.

The upcoming Chainlink staking

As per the Chainlink official Telegram page, staking is not yet live, but it is in progress.
At the moment, node operators can take tasks and get paid in LINK tokens, but they do not have to provide collateral. Essentially, this means that requesters need to pay the operators to retrieve data. So, while the system is decentralized, without staking it cannot be trustless.

Staking will be a game-changer for the Chainlink ecosystem because node operators’ actions will be verifiable on-chain. As such, bad actors will be penalized for providing bad data, including monetary loss and disqualification from future jobs.

In essence, once Chainlink staking goes live, the number of individuals and institutions seeking to use the Chainlink oracles for data will rise as well, due to the increased credibility. This demand will naturally lead to an increase in the demand for LINK tokens in the long run.

The incentive for the use of decentralized data oracles is there because unlike centralized providers, there is a lower risk of bias in the data provided. Considering that the decentralized ecosystem is still in its infancy, Chainlink has lots of room for growth going into the future, mainly in the area of decentralized finance.

A strong network security layer

When Chainlink staking goes live, it will have two types of staking – explicit and implicit staking. Explicit staking will entail service agreements for specific contracts where punishment for bad data will be clearly spelled out. On the other hand, implicit staking will entail a loss of economic value for general acts of providing bad data.

A combination of implicit and explicit staking will create a strong network layer for Chainlink. This will draw in serious players in the ecosystem, and by extension will attract demand for data from Chainlink oracles. The result will be continued growth in the value of LINK not out of speculation, but out of real demand for the token in the Chainlink ecosystem.

Strong partners

Chainlink has strong partners that could play a role in the long-term growth of the Chainlink token. For context, Chainlink is an IC3 partner, an initiative for cryptocurrencies and contracts. Other IC3 partners include Fidelity Labs, IBM, Microsoft, Siemens, JP Morgan, and Intel among others.

Given that these are all corporations that run data worth hundreds of billions of dollars a year, it is safe to say that Chainlink is in good company. The partnership points to a network that is still in its early stages, and with lots of potential for growth.

The speculative aspect

Unlike a year ago when Chainlink was trading below the top 20 in terms of market capitalization, it is now one of the largest altcoins. Today, Chainlink has a market capitalization north of $3 billion, and after months of gains, it is on the radar of even the most casual of crypto investors. This could see it draw in more money from speculators now that the crypto markets are regaining momentum.

Yes, Zeus Capital is running a FUD campaign against LINK, but that shouldn’t be something that weighs the cryptocurrency down. Based on the above factors, there is a good chance that LINK is still in its early days, even at $8. The next level to watch is $10. If it pushes past this level, FOMO could see it test new heights in 2020.