Chainlink (LINK) has recently regained its bullish momentum, showing signs of recovery after breaking past the $23.83 mark on January 17, 2025. The shift in market structure has been accompanied by increased demand and a surge in momentum, giving some traders optimism that LINK could surpass $31 in the coming weeks. However, despite these positive signals, concerns about the token’s potential overvaluation are beginning to surface, as indicated by the rising Network Value to Transactions (NVT) ratio.
Chainlink’s Bullish Recovery and Accumulation Signals
After struggling with bearish sentiment in recent weeks, Chainlink managed to hold above the $20 psychological support level and retested the 61.8% Fibonacci level, a key technical indicator. This stability is seen as a sign of potential growth, with many expecting the price to continue rising toward new highs.
On-chain metrics also support the notion of continued accumulation. The 180-day mean coin age, which tracks the movement of coins, has trended upward, signaling that long-term holders are accumulating LINK, potentially anticipating higher prices. Additionally, daily active addresses peaked during December, just before LINK’s price surged close to $30. While activity has since declined, it has remained steady at levels seen in late November, which still suggests healthy investor participation.
Furthermore, Chainlink’s development activity, which had slowed during the holiday season, showed signs of recovery in early January, returning to levels seen in mid-December. This rebound in development suggests that the project is still active, which often bodes well for the long-term outlook.
The NVT Ratio: A Warning of Overvaluation?
While the accumulation trends and development activity paint a positive picture for Chainlink, the rising NVT ratio is raising red flags. The NVT ratio compares the market cap of a cryptocurrency to its on-chain transaction volume. In Chainlink’s case, this ratio has surged to levels close to the highs seen in September 2024 and January 2020, which typically indicates that the price may be outpacing the actual transaction volume on the network.
When the NVT ratio increases, it can signal two things: either a drop in on-chain transaction volume or a rapid increase in the market cap, with price rising faster than actual usage. In both cases, the result is the same—overvaluation. The rising NVT ratio suggests that Chainlink’s price might be disconnecting from its underlying on-chain activity, pointing to a potential price correction in the near future.
Though the NVT ratio alone does not guarantee a major price drop, it serves as a cautionary signal for investors. If the price continues to outpace transaction volumes, it could lead to a market correction where the price aligns more closely with the network’s actual activity.
Conclusion: Should Investors Be Concerned?
Chainlink’s recovery and accumulation trends suggest that the token has the potential to move higher, with some targeting prices beyond $30. However, the rising NVT ratio raises questions about whether LINK is becoming overvalued. While the accumulation by long-term holders and the recovery in development activity are positive signs, the disconnect between price and on-chain activity could signal that a correction is on the horizon.
Investors should remain cautious and keep an eye on the NVT ratio as well as the broader market trends. While LINK’s bullish structure might continue, the overvaluation concerns raised by the NVT ratio should not be ignored, as it could lead to a pullback if transaction volumes fail to keep pace with rising market caps.
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