Should You Buy the Dip in Chainlink Right Now?

The crypto market was on a roll in 2024, but many of the leading names have backed down in recent months.

The Chainlink (CRYPTO: LINK) oracle coin had doubled in 52 weeks on Dec. 17. That turned out to be the peak of this surge. The coin price dropped a staggering 43% from there to this writing on April 2. By contrast, the massive Bitcoin (CRYPTO: BTC) rose 151% and then backed down by just 19% in the same time spans.

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Chainlink's chart has lost its swagger. Today, the coin is trading 24% below its year-ago value.

Did Chainlink investors get too excited last fall, or is the coin an excellent buy at these lower prices? Let's take a look.

Why I'm putting my own money into Chainlink right now

Spoiler alert: I bought a few Chainlink coins three weeks ago. I'm down 5% on that investment so far, including the 1.8% headwind from Coinbase's (NASDAQ: COIN) transaction fees. You can get an even nicer starting price today.

In other words, I'm so convinced of Chainlink's long-term value that I'm putting real money in it during this price dip. Read on to see why I think you should consider a small Chainlink position, too.

Chainlink's unique role in the crypto world

Different cryptocurrencies serve different purposes. Chainlink is the leading provider of a certain service, and it's not a close race.

As an oracle coin, Chainlink provides real-world data to smart contracts. Its decentralized data feeds cover thrilling topics such as gold and silver prices, currency exchange rates, and inflation rates. Its data streams update more often, focusing on dollar-based cryptocurrency pricing data so far. There's a third data service called SmartData, which looks at more esoteric information about popular cryptocurrencies, such as the current cash reserves behind most stablecoins.

App developers can use this data to design smart contracts, running on well-known platforms like Ethereum (CRYPTO: ETH) or Solana (CRYPTO: SOL). The idea is to monitor Chainlink's data feeds and streams until one or more values reach a defined target value. That event then triggers the execution of that contract, which can mean many things.

For example, the contract might send 0.1 Bitcoin to a certain address when inflation is below 3% and the Euro is worth more than $1.20. That's just a silly illustration off the top of my head, but you can set up some mighty sophisticated contract terms with Chainlink's real-time data.

Chainlink's surprisingly modest competition

So Chainlink serves up fresh data to a whole world of decentralized finance (DeFi) tools. Every data request comes with a very small fee. In the long run, this pool of tiny payouts should add up to real money. You'd think the crypto market would be packed with alternative Oracles, all hoping to snag a piece of Chainlink's money-making opportunity.

But there really isn't a groundswell of potential Chainlink usurpers. Chainlink's total market value stands at $9.2 billion today. According to CoinMarketCap, the second largest Oracle coin is Bittensor (CRYPTO: TAO) at $2.0 billion, followed by Pyth Network (CRYPTO: PYTH) at $528 million.

Those are the only three Oracles large enough to let me write about them. The rest are worth less than $200 million each and their transaction volumes are a tiny fraction of Chainlink's.

And these two potential rivals are not quite the same thing as Chainlink. The Pyth Network only offers cryptocurrency pricing and Bittensor is trying to build artificial intelligence (AI) systems and machine learning models on the blockchain. Its data feeds are designed to support these AI tools, and are not easily available to Ethereum or Solana apps.

Bottom line: This is a great time to nibble on Chainlink coins

Chainlink is a unique provider of valuable services in the crypto world. DeFi apps and large-scale automated crypto traders may not represent a huge target market today, but that should change over the next few years. As such, Chainlink's data services could become very valuable over time. It's still early, and not at all too late for new rivals to enter the picture.

However, Chainlink has a huge first-mover advantage here and I can't wait to see how my little investment shapes up over the years. This little subsector leader looks like a great buy in this price dip.

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Anders Bylund has positions in Bitcoin, Chainlink, Coinbase Global, Ethereum, and Solana. The Motley Fool has positions in and recommends Bitcoin, Chainlink, Coinbase Global, Ethereum, and Solana. The Motley Fool recommends Bittensor and Pyth Network. The Motley Fool has a disclosure policy.