Chainlink is up 1,438% in 12 months, but can it sustain its gains?

“Fake it till you make it” is a common phrase in business.

If you’ve ever watched The Apprentice, you’ll have seen this mentality in action. Most of those candidates, and many business people in general, simply con their way into jobs and deals.

In The Apprentice, the candidates are usually pushed hard enough for their fakery to be exposed. This is why it makes for such great TV.

In real life, however, most half-decent fakers go on to have long, successful careers.

So this leads to the question: if they do make it, were they ever really faking it?

Or to put it another way: if you lie about being a successful businessperson in order to become a successful businessperson, does success erase the original lie, or are you still a fraud?

The reason I’ve been thinking about this is because it resonates with a lot of what goes on in investment, and particularly in crypto investment.

Companies and projects bolster up their numbers and credentials in the hope of attracting interest and investors, which will lead to bigger numbers and better credentials.

If these tactics work, and they do get higher valuations and more investment, then do the ends justify the means, and does this now mean they are good projects to invest in?

I guess you could just say, this is the whole point of marketing.

If a company with a worse product has better marketing than its competitor, it will often succeed while the company with the better product and worse marketing will fail.

But in the world of crypto, much of this “marketing” isn’t even done by the projects themselves. It’s done by their investors.

Once an online community “buys in” to a certain project they will do all the marketing the project could ever dream of.

And this makes it very difficult to sort fact from fiction when it comes to crypto investing.

This is shown perfectly in crypto’s latest darling, Chainlink.

How Chainlink became crypto’s best-performing project

Chainlink is the best-performing crypto over the last 12 months, by some margin. In Over the last 12 months, it’s up 1,438%, with most of that gain coming since April this year.

On Saturday, Chainlink surged another 89% in less than 24 hours, and it now stands 290% up for the month.

That’s just under a 4x gain in one month, and a 15X gain in 12.

Chainlink is far from an obscure project. It’s currently sitting in 16th place on CoinMarketCap.

If you invest in “alts” the chances are you’ll have heard of Chainlink. I dedicated a whole issue of Crypto Wire last month to ranking it.

But here’s the thing. Chainlink is one of the most brigaded crypto projects in existence.

Back at the time of Chainlink’s initial coin offering (ICO) in September 2017, the internet forum 4chan took an interest.

As I wrote in last month’s Crypto Wire:

If you haven’t heard of 4chan, I don’t recommend you go searching for it. If you have, you’ll know why I’m making that recommendation.

4chan is a place on the internet that still operates like the internet did in the 90s. It’s “the wild west”.

It’s basically a series of anonymous image-based message boards where anything goes. And I mean anything.

You can think of it as like the primordial goo from which life emerged. And just like the life that emerged from that goo, some of it is good and some of it is bad. Very bad,

A lot of the content that goes viral on the internet – both good and bad – originated on 4chan.

And a lot of hype and FUD about certain crypto projects originates on 4chan, too. From its /biz message board.

4chan can cause some serious volatility in projects it takes an interest in. And the number one crypto that 4chan is interested in is Chainlink, or “Stinky Linky” as they call it.

This makes it pretty hard to sort some of Chainlink’s fact form its fiction. And it is also the reason, a lot of people believe Chainlink is a scam.

I’ve done a fair bit of research into the scam allegations and I can’t find anything of substance.

But, although, Chainlink is not a scam. It is a very popular topic within the 4chan community. And that community has a lot of power on the internet.

For example, in the past, 4chan managed to:

  • Crash Apple’s stock price by 10% by starting a rumour Steve Jobs had died (back when he was still alive)
  • Made the swastika symbol appear as Google’s top trending topic in July 2008, forcing Google to issue an apology
  • Started the Anonymous movement – those people who wear Guy Fawkes masks
  • Made Kim Jong-un Time readers’ person of the year in 2012 – and made the entire list spell out “KJU gas chambers”.

So manipulating the price and information about a crypto is child’s play for 4chan. And that’s definitely something to consider, given how much attention Chainlink gets over there.

So since Chainlink launched its mainnet in May and really started taking off, the shills have been out in force.

It’s not all just hype

The thing here though is, Chainlink is a solid project, solving a real problem that is applicable many different areas.

It is a decentralised oracle provider. I wrote back in March 2018 why oracles are so important to crypto, and particularly smart contracts:

Oracles are essentially knowledge centres. You can ask them questions and get instant answers. They are computer programs running on the internet.

Let’s take an example of how this is useful.

Say you go on holiday and take out insurance. Your flight is delayed by ten hours and you are due compensation.

How can your insurance company find out if your flight was delayed or not? They ask an oracle.

The oracle instantly relays that flight BA5602 scheduled to take off from London at 8am on 2 March was delayed by ten hours.

Your insurance then pays you your delayed flight entitlement.

Where this gets interesting, is when we bring in the old crypto staple, smart contracts.

Smart contracts and oracles

By having an oracle, smart contracts can be programmed to automatically pay out as soon as a certain condition is met.

So, in this example, as soon as your flight was delayed, your insurance would pay you.

This wouldn’t even need any human intervention, and would happen instantly. No more arguing on the phone with your insurance provider. No more waiting weeks for a cheque. It would all happen in the blink of an eye, with zero effort on your part.

As I’m sure you can imagine, this oracle-smart contract setup has huge possibilities. And not just for insurance. Two other major ones are prediction markets and sports betting. But really, the possibilities are endless.

In the 16 months since I wrote that, many crypto projects and investors have seen how important oracles are to the ecosystem, and Chainlink’s price has steadily risen.

What really gave Chainlink a boost was a blog post by Google Cloud last month.

As I said in last month’s Crypto Wire:

I’m writing this on Friday 14 June, and less than 24 hours ago Chainlink announced Google is integrating Chainlink (and Ethereum) into its cloud services.

Here’s Chainlink’s tweet, which linked directly to Google’s article:

This is a major endorsement from Google, arguably the most important company in the world, and on this news Chainlink is up 36% in the last 24 hours.

But it turns out Chainlink jumped much more than 36% on the news.

A few days later I covered the announcement in Exponential Investor (In this article):

Three days later came the big one – on 13 June Chainlink popped 72% in the space of 1 hour and 45 minutes.

Between 18:04 and 19:49 Chainlink’s price went from $1.13 to $1.94… and stayed up. It’s currently at $2.09.

Why? A blog post Google Cloud published saying it was working on using Ethereum and Chainlink in its projects.

At the time that jump seemed crazy and unsustainable. But as I type this, Chainlink is sitting at $3.76 – another 79% up from that crazy rise.

But Chainlink is long overdue a big correction… isn’t it?

Now, Chainlink certainly isn’t “faking it”. But, it is long overdue a correction on its monumental price rise… or is it?

That’s what brings me back to my opening question: if they do make it, were they ever really faking it?

If the market is valuing Chainlink at these prices in comparison to other projects, maybe the market it right. Or maybe, we are about to see a truly violent correction.

When something generates this kind of return in crypto, especially when the rest of the market is floundering, it draws a lot of attention, FOMO and new money into it.

Logically Chainlink is well overdue a significant price correction. But in the world of crypto, prices rarely follow logic.

And that brings me back to our number one rule. Never invest money in any crypto that you’re not happy to throw away.

No matter how good a project’s prospects may be, we have to remember that this is a highly manipulated market. Crypto prices never go to plan.

Rationally, Chainlink is overdue a massive correction. But as the favourite quote of the investment writer goes: “The market can stay irrational much longer than you can stay solvent.”

So Chainlink is an interesting one. And certainly something I’ll be keeping my eye on in the coming months.

Now, if you are interested in learning how to invest in crypto, and if you’ve read this far I’d take a wild guess that you are, I can highly recommend you check out this book.
Until next time,

Harry Hamburg
Editor, Exponential Investor

Category: Cryptocurrency

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