Chainlink (LINK) witnessed a surprising 20% decline on Monday, even as Bitwise filed for a spot Chainlink Exchange-Traded Fund (ETF) on August 26. The ETF filing was widely viewed as a positive development, given the network’s rising institutional adoption and its potential appeal to retail investors. Yet, despite the promising news, LINK’s sharp correction has left investors questioning whether the token is nearing a bottom or facing a deeper downturn.
Why Chainlink is Falling
LINK has enjoyed a strong 2025 so far, having doubled in value since its April low of $10.10. The rally gained momentum in June and accelerated through August, with the token reaching a local high of $27.87 on August 22. However, the pace of this rally formed an ascending wedge, a chart pattern often associated with impending bearish reversals.
The breakdown materialised on August 25, when LINK formed a bearish engulfing candlestick, signalling the pattern’s completion. Technical indicators further strengthened the bearish outlook. The Relative Strength Index (RSI) had already flashed a bearish divergence before the breakdown, while the Moving Average Convergence Divergence (MACD) confirmed the weakness with a bearish cross shortly afterwards.
LINK/USDT Daily Chart | Credit: Valdrin Tahiri/TradingView
As a result, LINK’s strong run came to a halt, with analysts now eyeing key support zones. Fibonacci retracement levels suggest the next critical supports lie at $21.40 and $19.40, with the latter overlapping a strong horizontal support area.
Technical Outlook: Wave Count and Corrections
Elliott Wave analysis shows that Chainlink’s latest surge formed a completed five-wave structure within the ascending wedge. This suggests the rally may have reached its short-term peak. The current decline could represent wave A of an A-B-C corrective pattern, targeting the aforementioned Fibonacci levels.
Projections from the Fibonacci Time Zone tool indicate that the correction may unfold until mid-to-late September, with a potential completion window between September 10 and 25.
LINK/USDT Daily Chart | Credit: Valdrin Tahiri/TradingView
Longer-term scenarios, however, remain uncertain. Two competing wave counts highlight different paths for LINK:
Bearish Case: LINK has already completed an A-B-C correction and is now poised for deeper declines. This would see prices break below current supports and potentially revisit new yearly lows.
LINK/USDT Daily Chart | Credit: Valdrin Tahiri/TradingView
Bullish Case: The upward surge represented a 1-2/1-2 wave formation, suggesting the decline is only a corrective pause. In this scenario, LINK could find support at the 0.382 Fibonacci retracement before resuming its uptrend and reaching new highs.
Analysts lean cautiously towards the bullish scenario since the structure of LINK’s upward moves suggests separate wave formations, often a precursor to further rallies.
Positive News, Negative Price Reaction
The contrast between Bitwise’s ETF filing and LINK’s price slump highlights the disconnect between fundamentals and market psychology. While ETFs for leading altcoins could enhance accessibility and legitimacy for retail investors, traders remain wary of overheated price action and profit-taking risks following LINK’s rapid surge.
This divergence reflects a broader trend in the crypto market, where positive institutional news often collides with short-term technical pressures. As such, LINK’s decline may represent a healthy cooldown rather than a collapse, provided it stabilises at strong support levels.
What to Expect Next
The immediate outlook for LINK is bearish, with analysts expecting a retest of the $21–19 zone. Whether this level holds could dictate LINK’s medium-term trajectory. A successful defence would reinforce the bullish wave count, potentially setting the stage for a new rally later in the year. Conversely, a decisive breakdown could trigger a deeper correction, undermining the ETF momentum and weighing on investor sentiment.
In the coming weeks, attention will remain on whether Chainlink’s correction unfolds as a controlled retracement or escalates into a prolonged downturn. While long-term prospects remain supported by institutional interest and technological adoption, short-term volatility is likely to dominate trading behaviour.
