A recent analysis by Timothy Peterson shows that LINK’s price is correlated with ETH Gas cost
According to his analysis, the value of ChainLink follows the fluctuations of ETH gas fees
At the time of writing, Mr. Peterson was yet to expound on his observation
One reason behind the correlation could be that activity on the ChainLink network is tied to DeFi activity on the Etheruem network
Crypto analyst Timothy Peterson of Cane Island Alternative Advisors has discovered a correlation between the price of ChainLink (LINK) and the cost to transact on the Ethereum network. According to Mr. Peterson, LINK’s price is related to the cost to transact on the ETH network. Where Ethereum gas fees go, LINK follows.
Mr. Peterson shared his analysis via the following tweet.
At the time of writing, Mr. Peterson was yet to expound on his discovery.
However, eyeballing the current 2020 ETH Gas price chart reveals that Ethereum gas fees have constantly increased since the beginning of the year.
Also from the chart, it can be safe to ignore the high fees seen on the 10th and 11th of June. Refreshing our memories a bit, on these dates, two transactions shocked the crypto-verse by paying over $5 Million in ETH gas fees. Treating these two transactions as anomalies reveals a relatively smooth increment in ETH gas fees.
ChainLink’s 2020 Price Growth Due to DeFi on the Ethereum Network
Comparing the chart with ChainLink’s meteoritic rise, January 2020 found LINK trading at approximately $1.85. The same LINK hit an all-time high value of around $20 on the 16th of August: a 981% increment in value. At the time of writing, LINK is trading at $14.244 which is still a good price given its January value.
Besides investor confidence and FOMO, the growth of LINK in the crypto markets could be attributed to the fact that majority of the DeFi platforms use ChainLink’s Oracle network. As DeFi platforms got popular this year, ChainLink’s oracles were hard at work and so were their node operators who get rewarded in LINK.
Therefore, it can be loosely concluded that the correlation observed between the price of LINK and ETH gas cost is very much tied at the hip with the DeFi boom of 2020.