In the last weeks, ChainLink has been under heavy attack by an activist crypto hedge fund. They even put a stunning or absurd price target of $0.07 and call ChainLink a fraud. Currently, ChainLink trades at $7.19 at time of writing.
Today, we take a look at Active Users and check whether ChainLink is under or overvalued based on a Price to Monthly active users.
Active users & Price to MAU Ratio
ChainLink has one of the best use case of the whole crypto world: price oracles. Over the months, ChainLink has continued to grow its user base with more partnerships. Securing the price feeds of smart contracts has become paramount for all DeFi projects, whether on Ethereum or on other smart chains.
If these partnerships were only some bullshit marketing, we would expect a stagnant or decreasing user base for ChainLink.
However, blockchain data is not easily manipulable, even more on Ethereum as everything is accessible. So we did an update on our previous analysis of ChainLink active users.
As expected, ChainLink continues to perform.
More than 4,000 daily users have recently interacted with ChainLink smart contract with a peak above 11,000. It is a stunning growth which can be explained by the growth of DeFi dApps and higher decentralisation of LINK holders with rising price.
Make no mistake, ChainLink has been used, is currently used and will continue to be used in the future.
There are other price oracles’ providers but ChainLink is still the incontestable leader.
So active users, which we define as addresses interacting with the smart contract, are growing, like the LINK token. Now the question is, what has been growing faster the active users or ChainLink price?
We compare both metrics thanks to our Price to Monthly Active Users, which is the market cap divided by the monthly active users of ChainLink smart contracts.
The lower the ratio, the cheaper ChainLink.
We can see that even if ChainLink price has skyrocketed in recent months, active users have grown faster. As a result, the ratio points out to a relative undervaluation of ChainLink. From a historical point of view, we can see that the ratio has touched a low, not seen for months.
When crypto markets fell hard in March 2020, LINK price went down as well but active users did continue to grow. It was a good buying opportunity.
With the recent FUD, LINK price has been hammered a bit and is cheap but not yet dirty cheap from an active user point of view. At this valuation ($2.5B), LINK looks fairly valued thanks to a growing user base.
We would definitely not open a short position on LINK here given its huge user base. The ChainLink team has developed a product which is almost used everywhere in crypto world and will be used in the real world too.
Why short one of the most successful crypto project when there are numerous expensive rocks which do nothing out there?
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