Cryptocurrencies overall continue to flounder. Chainlink (CCC:LINK-USD) is no exception.
After the late-May “dead cat bounce” that followed the crypto crash from that month, the price of this altcoin has fallen around 50%.
Down nearly 70% from its all-time high, is there hope for a big rebound anytime soon? Don’t hold your breath.
For the time being, as retail speculation cools down, it’s hard to see prices across-the-board moving back in the right direction.
Yet, even this catalyst may not be enough to spring life back into the price of Chainlink.
It may have impressive technological features. Features that could play a big role in taking the world of DeFi (decentralized finance) to the next level.
Even so, this may not necessarily translate into significantly higher prices over time for its native crypto, LINK.
That’s not to say it’ll continue to flounder in the years ahead. Nor is it a warning that it’ll continue to lose its value over time, falling to the sub-$1 price levels it traded at several years back.
But considering that names like Ethereum, Cardano (CCC:ADA-USD), and others seem more primed to make major recoveries over the next year, there’s little reason to tie up capital into this name.
Chainlink Has the Goods
You can separate altcoins into two distinct groups. First, there are the ones that could supplant the Ethereum network’s dominant role in the world of DeFi. Think Cardano, or Polygon (CCC:MATIC-USD).
So is this crypto because of its place in the blockchain ecosystem. As I wrote back in June, Chainlink is a blockchain oracle.
Blockchain oracles are platforms that provide the off-network necessary to power smart contracts. In other words, the Ethereum network wouldn’t be where it is today without its technology.
If that by itself piques your interest, the story gets even better. This platform isn’t exclusive to Ethereum.
Other blockchains, like Polkadot and Binance (CCC:BNB-USD), have used its technology as well. As other blockchains begin to have smart contract capabilities, we could see even greater usage of Chainlink’s platform in the coming years.
The caveat is that this may not necessarily result in a dramatically higher price for LINK over time. It may have the goods when it comes to technology, but other altcoins may make for better bets on an overall market recovery.
Why Its Performance Could Underwhelm
With its ties to the proliferation of smart contract technology, Chainlink may have an interesting hook. As smart contracts become standard among blockchain platforms, one would assume this bodes well for this token’s long-term price performance.
Yet, there are several reasons why it may not play out this one. InvestorPlace’s Will Ashworth covered two key issues in his June 18 article on this crypto.
First, it may have a first mover advantage now. but up-and-coming blockchain oracle API3 (CCC:API3-USD) could build a better mousetrap, and soon give it a run for its money.
Second, it’s questionable how wider usage of blockchain oracles will translate into higher prices for Chainlink.
It’s not only been this crypto’s skeptics that have said that. Even those who have laid out the bull case for it, like a Seeking Alpha commentator did back in January, concede this may be a risk.
In contrast, cryptos with pending upgrades, may have a clearer path to a rebound.
Rising institutional interest in Cardano points to that altcoin in particular as the one to lay your chips behind.
Smaller in terms of market capitalization, in theory LINK may have greater runway, but as it’s still uncertain to what extent increased usage will boost its token price. It’s hard to say this is a “must-have” crypto to own ahead of a possible late 2021/early 2022 recovery.
For Now, Pounce on Other Altcoins Instead
This crypto could eventually have its day in the sun. If it continues to be an important backbone of the smart contract aspects of DeFi, the price of its native token (LINK) could climb back to its high water mark of $52.88, versus the $15 or so it trades for today.
Yet, despite these positives, it may be best to sit out on Chainlink for now. Instead, consider the other altcoin opportunities out there, with clearer recovery paths.
On the date of publication, Thomas Niel held long positions in Bitcoin and Ethereum. He did not have (either directly or indirectly) any positions in any other securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Thomas Niel, contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016.