Cryptocurrencies opened the new trading week in the red. Even within the current downturn, certain parameters can already be identified that may support future growth. At the same time, it should be noted that this correction was largely anticipated – and for one key reason: liquidity.

In the long run, cryptocurrency prices often reflect underlying fundamentals. In the short term, however, the dynamics can be more complex, with liquidity playing a central role.

While an increase in a cryptocurrency’s intrinsic value may point to potential growth over time, the market must first create conditions for buy positions to be filled. Every transaction requires both a buyer and a seller, and because these interactions occur electronically and at high speed, price movements tend to follow algorithmic patterns.

The most efficient way to match large volumes of transactions is through liquidity sweeps. Such orders often cluster above or below key price extremes where Stop Orders are concentrated.

Chainlink technical analysis

LINKUSD - 4 Hour Time Frame

In the first half of August, Chainlink experienced an impulsive bullish move, followed by weeks of sideways correction – essentially a phase of liquidity accumulation. Fundamentally, little has changed, and the broader growth outlook remains.

However, for buyers to gain access to sufficient sell-side volume, the price may need to dip below the recent correction low. This makes the current sharp decline less of a surprise.

The key question now is whether the market will produce a similarly strong upward move, which could validate a buying opportunity, or whether prices will continue lower.

What can be said with certainty is that entering during sharp declines without confirmation carries elevated risk. The price action itself needs to confirm the bullish setup before any position could be considered.