Polkadot Has Hit the Right Notes, and It’s Almost Party Time

Polkadot Has Hit the Right Notes, and It's Almost Party Time

Summary

  • Polkadot is hardly one year old but has attracted notable institutional investment.
  • The DOT price rally has outperformed BTC and ETH during its short lifetime.

Polkadot continued with its struggle to the all-time high of $42.25 it set last week. At the time of going to press, the cryptocurrency was down 23% from the mark, trading at $32.58. DOT seemed to be struggling to get back to the ascending trend line, with a price drop of about 4.8% in the previous 24 hours. 

Strong market performance

Generally, Polkadot has mirrored the global cryptocurrency market over the past ten days.  During that period, Bitcoin set a historic high of $58,200 which has since slid to $47,900. Similarly, ETH tested the $2,000 mark before spiraling down to $1,545, while DOT also set its record price during the same period.

Polkadot has undergone a significant correction but seems set to attempt another major price rally. Its market capitalization stands at $31 billion, making it the sixth-largest digital currency in the world. However, its short stint in the market and its blockchain architecture are fundamental reasons why a break into the top 3 seems possible.

Based on its technical capabilities, Polkadot is considered by many developers as being capable of taking on Ethereum. This is founded on the reasoning that it facilitates smart contracts but with arguably better efficiency than Ethereum.  As a result, many investors are increasingly diversifying their portfolios from ETH and BTC to DOT.

Launched in May 2020, Polkadot is less than a year old in the crypto-market. However, during that short stint, it has taken on the economic crisis caused by the coronavirus pandemic and climbed up the ranks of global cryptocurrencies. In the process, it has knocked out established cryptocurrencies and may soon get into the top three.

In its 9-month market lifespan, the virtual currency has won over investors and has risen by 1,100%. In fact, DOT has outperformed the world’s largest cryptocurrency. It has surged 255% year-on-year equivalent, compared to BTC’s 68% rise. That is, by all means, a supernormal return for DOT’s formative investors, regardless of Bitcoin’s historic gains. It has also outscored ETH 88% to 50% in gains made over the past two months.

A solid foundation and strong driving forces

Three major factors stand out as DOT’s selling points: the recent market hype around DeFi, a technically strong market structure, and the anticipation of scalable blockchain networks.

Polkadot’s price rally to its all-time high was supported by bullish investors anticipating its parachain auctions. Parachain auctions are designed to enable the connection between Polkadot and more established blockchains like Bitcoin and Ethereum.

The corporate world is fast responding to Polkadot’s promising long-term outlook. FD7 Ventures, a Dubai-based cryptocurrency investment fund, has announced plans to purchase $750 million worth of two altcoins, namely Cardano and Polkadot.

Interestingly, the firm intends to do this by diversifying the stated amounts from Bitcoin in the next 30 days.  To compound the significance of this move is the realization that FD7 Ventures will be swapping 75% of its BTC inventory for the two altcoins.

Technical outlook

DOT’s Relative Strength Index (RSI) has largely stayed at or below 50 in the past week, pointing to a market controlled by bears. The cryptocurrency will find the first support level at $28.67, while the second one will be at $31.07. It will encounter resistance at $32.58, beyond which it may rise to $34.38.

DOT/USD Technical outlook
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