The increase in development activity and unique addresses in the second quarter for Polkadot has not translated into significant gains for DOT. However, the upbeat sentiment in the market could result in quick gains for DOT in the third quarter.
Blockchain interoperability is one of the hottest topics in the crypto industry, with the advancement of blockchain technology increasing the need for different blockchains to communicate seamlessly with each other. Dot [DOT] is one of the leading projects that rapidly advance the development of blockchain interoperability.
Read Polka Dots [DOT] Price Forecast 2023-24
The Polkadot blockchain offers an ecosystem of custom blockchains called “parachains.” Parachains are designed to host decentralized applications (dApps) and these parachains are deployed on Polkadot’s central hub, the Relay Chain.
Blockchain projects such as Centrifuge, Clover, and Moonbeam have used Polkadot’s interoperability to deliver scalable applications across parallel blockchains.
Polkadot’s native token, DOT, provides token holders with board privileges and staking rewards. While the network privileges and staking rewards caused DOT to have a bullish Q1 with gains of 86.19% pushing it to a yearly high of $7.90, Q2 saw a complete reversal of fortunes for DOT.
Languishing under a bearish market structure, DOT returned all of its Q1 gains. Although the altcoin has been in a bullish rally since mid-June, it has failed to turn its market structure to bearish as sellers continue to hold sway.
What can DOT traders and investors watch out for in the coming weeks?
Bullish rally severely limited by price movement to the south
The daily price chart for DOT showed that the token has been in a downward trend since mid-February. The market structure was clearly bearish with the last lower high at $7. This lower high was recorded on April 18 and DOT has been unable to make significant gains to break this key bearish level.
The dip to the December 2022 low of $4.24 on June 16 triggered a positive reaction from the bulls. A subsequent gain of 33.9% caused DOT to hit $5.74, breaking the $5.23 resistance level and most recent lower low. However, declining volumes, as highlighted by the On Balance Volume (OBV) indicator, have limited further gains as prices hover around the main resistance level.
The Relative Strength Index (RSI) was below the neutral-50 between April and June, suggesting a long-term downward trend. However, the RSI climbed above the neutral-50 in July, suggesting that momentum may be shifting.
This increase in buying pressure may be related to recent developments in the Polkadot development ecosystem. According to a Polkadot Network blog post,
“Polkadot was the top Web3 protocol by development activity during the quarter, as it was in the first quarter – and there was another impressive increase in unique accounts, reaching nearly four million across the entire ecosystem.”
While this was enough for a short-term rally, the long-term outlook for DOT still looks bleak. A break below the key $5.23 support level could signal an extension of DOT’s bearish structure. With declining volume and diminishing buying pressure, the longer term bottom could be in question for DOT.
On-chain metrics highlighted the significant lack of demand for DOT
The bearish outlook on the charts has been transferred to the futures market, according to data from Coinalyze. The outstanding interest has been falling since mid-April. OI fell more than $50 million between mid-April and July, with another significant drop on June 10. The recent rally had little effect on the OI, with speculators continuing to reduce their exposure to DOT.
Similarly, Spot CVD continued to decline sharply, highlighting the lack of demand for DOT. However, one metric that could encourage bulls is the funding rate, which has remained positive since early July.
What does the near future hold for DOT?
With the market experiencing a bullish rebound in recent weeks, DOT buyers are confident that a price reversal is a possibility. However, there are major hurdles to overcome for this to happen.
How much are 1,10,100 DOTs worth today?
Maintaining buy levels above the $5.23 support will be critical for a reversal. A bullish Bitcoin [BTC] can encourage buyers in this. If the critical resistance level of $6.12 is reversed, bulls could target firmly at $7, which would make DOT bullish in the long run.
On the other hand, failing to defend the $5.23 support could lead DOT to drop to another year low, especially if there is a significant market correction. Overall, DOT’s price move in the scale with the scale slightly leaning in favor of the bears.
This post Polkadot Roadmap: DOT at a crossroads, what’s the way forward?
was published first on https://ambcrypto.com/polkadot-roadmap-dot-at-a-crossroads-whats-the-way-ahead/