Where Will Chainlink (LINK) Be When the Next Bull Run Hits?

LINK (CRYPTO: LINK), the native token of the Chainlink network, hit a record high of $52.99 on May 2021. But today, it trades at less than $10. Let's see why this hot cryptocurrency cooled off, and if it can bounce back once the next crypto bull market starts.

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What sets LINK apart from other cryptocurrencies?

Chainlink is a decentralized "oracle" network that connects blockchains to real-world data, including weather reports, stock prices, sports scores, and shipping information. It serves developer-oriented blockchains, such as Ethereum (CRYPTO: ETH), which need access to real-world data to support their decentralized applications.

Chainlink's independent node operators fetch and deliver that all that data. Those operators are paid in LINK tokens, which they can stake (lock up) as collateral to earn interest-like rewards. But if they ever feed false data into Chainlink's network, those holdings can be confiscated, and their reputation scores can be reduced. Node operators with lower reputation scores are less likely to receive new requests, so the entire network runs on trust.

LINK can't be valued by its scarcity, since Chainlink's developers pre-mined its entire supply of 100 billion tokens before its 2017 initial coin offering (ICO). Instead, it's valued by the growing demand for real-world data across booming developer blockchains like Ethereum, as well as the expansion of its network of independent node operators for aggregating more data.

Will LINK soar in the next crypto bull market?

LINK, like other smaller altcoins, lost its luster over the past five years as higher interest rates drove investors toward more conservative investments. It's also harder to value than Bitcoin or Ethereum, which have more visible catalysts on the horizon.

But over the past year, Chainlink has partnered with two dozen major financial institutions -- including UBS, the securities settlement house Euroclear, and the SWIFT network -- to accelerate interbank transfers, automate transactions, and tokenize real-world assets.

Therefore, Chainlink could evolve from a support network for decentralized apps into a trusted data and connectivity layer between traditional financial institutions and blockchain platforms. If that happens, LINK could become much more valuable for its independent node operators.

LINK clearly has more irons in the fire than many other smaller altcoins, but it probably won't attract much attention in this choppy crypto market. However, if macro headwinds dissipate and retail investors warm up to smaller cryptocurrencies again, LINK could head much higher.

Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin, Chainlink, and Ethereum. The Motley Fool has a disclosure policy.