- DOT/USD is in a triangular consolidation
- The bias remains bearish
- Conservative traders might want to wait for the market to move first
There is nothing positive in the DOT/USD chart for bulls. The price action remains constrained by a triangular pattern that formed in the last twelve months.
Sure enough, the triangle may break in either direction. But the bias is bearish while Polkadot’s price action holds inside the pattern.
Polkadot’s price collapsed after the triple failure at the $50 area. The dollar’s strength was one reason, but surely some other factors contributed to the selloff.
Not even the renewed optimism in the cryptocurrency market that was seen in 2023 was enough. After a small bounce, Polkadot gave away all of its 2023 gains as the market was (and still is) unable to break the lower highs series. At the same time, it pushes for another lower low – a bearish development.
The bullish case for Polkadot
The only way to construct a bullish case for Polkadot is to wait for the market to move first simply. For a “proof of life,” if you want.
Such proof that the market turned bullish will appear only if the price moves above $8. And, if it holds there.
It would mean that the previous lower high is broken, and the bias turned bullish. Until such a move is seen on the daily chart, buying DOT/USD is risky.
The bearish case for Polkadot
It is easier to build a bearish case because of the descending triangle mentioned earlier. If the market makes a new lower low, the triangle’s measured move points to a drop toward the $1 area.
- Polkadot made a new low for the year
- All 2023 gains are gone as bears keep selling DOT/USD
- If Jerome Powell delivers a hawkish speech today, a descending triangle points to further downside for the DOT/USD pair
The cryptocurrency market rallied at the start of the year. Following a bearish 2022, investors saw the start of the new year as the beginning of a new bull market.
Bitcoin led, and other cryptocurrencies followed. But not all coins managed to close near their yearly highs.
For example, Polkadot made a new low for the year. More precisely, the DOT/USD pair gave back all of its 2023 gains, and things do not look good for investors.
That is particularly true ahead of the Fed’s Chair Jerome Powell’s testimony due today. He will testify about the semi-annual monetary policy report in front of the Senate Banking Committee in Washington, D.C., later today, and markets are eager to find out what he’s going to say about the future funds rate.
Any hawkish commentary should send the U.S. dollar higher across the board. Not only fiat currencies will react – but the crypto ones too.
Coupled with the technical analysis picture, the bias is bearish, as pointed out by a descending triangle.
A descending triangle spells trouble for DOT/USD
A descending triangle is a bearish continuation pattern. Hence, the price action following the pattern should continue in the same direction as the main trend traveled.
The main trend is bearish, given the fact that DOT/USD dropped from above $52 at the peak of 2021 to the current $4.7.
To confirm the bearish pattern, the market should travel a distance equal to at least the longest segment of the triangle. Calculating it does not make sense, as it points to almost 0.
I’m not saying that Polkadot will go to 0. I do state that before buying cheap coins, one should be better off looking at the bigger picture and looking for the obvious on a chart. In this case, as 2023 gains are gone, bulls are trapped. Add the descending triangle, and the bias remains bearish, not bullish.
- DOTUSD bullish setup in the makings
- The risk-reward ratio is close to 1:4
- A possible bullish case pattern supports the scenario
Money management is one of the areas in which many retail traders fail. Discipline is needed for success in speculating markets, and erratic price action can fool even the more experienced.
Because of that, a system based on money management rules helps the trading account as it offers the trader more chances to survive the market’s volatility. That is especially the case in the cryptocurrency market, where volatility is much higher than in other traditional markets.
The rule of thumb says that one should not enter a trade without a risk-reward ratio of at least 1:2. Effectively, it means that the trader expects twice the reward for every unit of risk taken. Simply put, the trader expects to make two dollars for every dollar risk.
Naturally, the bigger the rr ratio, the better. In the case of DOT/USD, a risk-reward ratio of 1:4 might be possible, given how the price action behaved from the 2022 lows.
A possible bullish flag pattern supports the trade
The most recent price action shows a possible bullish pattern. Ideally, the price action should break above the pattern’s highest point and keep rallying.
The invalidation point of both the bullish flag and the bullish scenario is $5. Therefore, the market must hold above $5, and traders should expect more strength on a break above $8.
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Polkadot had the second-highest development activity in 2022
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DOT price has heavily disappointed since the 2021 ATH but has recovered lately
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DOT faces resistance at $5 and may correct downwards
Polkadot (DOT/USD) buyers are struggling to break above $5. A technical outlook shows the cryptocurrency has been rejected at the building resistance for the second day. However, Polkadot fans should be at least excited by a relief rally that has seen the price recover from the $4.2 bottom.
If time is a true judge, then the Polkadot price has disappointed heavily. The cryptocurrency touched a high of nearly $56 in November 2021 and has since come crumbling. With a single-digit price now, DOT is a shell of its former self.
Although 2022 may have ended on a low note for DOT buyers, enthusiasts should be happy with the blockchain’s activity. Santiment data indicates that the blockchain had the highest development activity in the year after Cardano. Polkadot was followed by Cosmos blockchain, Ethereum, and Internet Computer in the top 5. That shows that the decline in the price of the native token wasn’t in any way signalling a falling popularity of the protocol. Rather, it was due to a sustained bearish market that has hit every cryptocurrency.
If you are considering buying DOT, you may have to wait until the throat clears. For short-term investors, a break above $5 is the needed confirmation.
DOT price facing resistance at $5 and 50-day MA
Based on the price action, DOT’s long-term momentum is still bearish. The short-term is bullish, with the RSI now in the bullish zone. However, DOT is facing resistance at the 50-day MA. The moving average coincides with the $5 resistance level.
What happens next for DOT?
A potential correction is looming for the DOT price at the current level if bulls do not recover above $5. If a breakout occurs, DOT could set the next target above $7, with minor corrections at $5.6 and $6.
Where to buy DOT
eToro
eToro offers a wide range of cryptos, such as Bitcoin, XRP and others, alongside crypto/fiat and crypto/crypto pairs. eToro users can connect with, learn from, and copy or get copied by other users.
Binance
Binance is one of the largest cryptocurrency exchanges in the world. It is better suited to more experienced investors and it offers a large number of cryptocurrencies to choose from, at over 600.
Binance is also known for having low trading fees and a multiple of trading options that its users can benefit from, such as; peer-to-peer trading, margin trading and spot trading.
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The Polkadot token has crashed by double digits in the past two weeks
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The cryptocurrency was among the tokens heavily shorted on major exchanges
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DOT maintains a downtrend and the next level to watch is $3.9
Barely two weeks ago, bets against many altcoins were on the rise. Santiment data indicated that Polkadot (DOT/USD) was among the cryptocurrencies targeted by shorts on major exchanges. At the time of Santiment data on December 10, DOT was trading at $5.3. The cryptocurrency now exchanges hands at $4.5, a loss of 17%. Are the short positions responsible for this?
The definite answer to the question could be yes, although that’s not always the case. Increased short positions can actually boost an asset’s price. That happens when investors cover their short positions, leading to a market phenomenon known as a “short squeeze.” However, as it looks, there are no signs of a short squeeze for DOT. The cryptocurrency maintains a downtrend, probably orchestrated by increased selling.
DOT outlook as price heads to the 2020 lows
Turning to the weekly chart gives a glimpse of Polkadot trading since the bull market started. From the chart, DOT trades at its lowest level since December 2020. Evidently, the cryptocurrency has lost all the gains it amassed during the bull market of 2021.
The volume indicators show that liquidity is waning as DOT heads lower. The price is set to find support at $3.96 next. The current price zone could interest buyers since this is where the bull market started.
Concluding thoughts
It would be interesting to see how the DOT price behaves at or around $4. Any potential bullish reversal should start here. There is no indication of that yet, as the cryptocurrency remains very bearish.
Buyers could hold DOT in consolidation mode at the crucial zone before finding the energy to break higher. DOT-related developments and improved sentiment in the broader crypto sector are the events to watch. A bearish break at $3.9 could pit DOT below $2.
Where to buy DOT
eToro
eToro offers a wide range of cryptos, such as Bitcoin, XRP and others, alongside crypto/fiat and crypto/crypto pairs. eToro users can connect with, learn from, and copy or get copied by other users.
Binance
Binance is one of the largest cryptocurrency exchanges in the world. It is better suited to more experienced investors and it offers a large number of cryptocurrencies to choose from, at over 600.
Binance is also known for having low trading fees and a multiple of trading options that its users can benefit from, such as; peer-to-peer trading, margin trading and spot trading.
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The Polkadot token has defended $5 for weeks
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The ecosystem has witnessed an increase in activity
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The token could remain vulnerable as longer-term momentum is still bearish
Polkadot (DOT/USD) trading at $5 would have been a false dream in November 2021 as it touched $55 ATH. But that is now the reality of the token of once a booming protocol labelled a Layer 0 blockchain. In case you are wondering, why Layer 0?
Polkadot was designed to operate at a deeper level compared to Layer 1 protocols like Solana and Ethereum. The brainchild of Gavin Wood, the Ethereum co-founder, provides the foundation for building other crypto projects. Polkadot was thought of as a new system that could allow different blockchains to interact. Polkadot also maintains the security of each separate blockchain built on it, called parachains. To sum it up, a Layer 0 blockchain acts like a foundational system of Layer 1 protocols.
The promise of cross-chain interoperability boosted Polkadot’s native token. It has not been the case this year, as lower crypto activity has pushed its native token back to a single-digit price. Nonetheless, as CoinJournal reported, activity is building on the Polkadot ecosystem. That has allowed DOT to defend $5 for several weeks. To an investor, does it make sense to scoop it at a low level?
DOT on a downtrend amid stability at $5
On the daily chart technical outlook, DOT maintains a long-term bearish momentum. The cryptocurrency broke below a minor support zone at $5.5. The minor level could still pose a resistance to the bulls.
The MACD indicator remains bearish. However, the bear momentum has slightly improved, implying that buyers have increased at the $5 level.
What next for DOT?
DOT price could remain subdued as the token remains in bear momentum. With the overall bear market staying put, it would be premature to buy DOT now.
Nonetheless, DOT needs to recapture minor support at $5.5 to consider a short-term price appreciation. For a longer-term move, the token must regain the $6.5 level. Otherwise, DOT will remain vulnerable to $4.5.
Where to buy DOT
eToro
eToro offers a wide range of cryptos, such as Bitcoin, XRP and others, alongside crypto/fiat and crypto/crypto pairs. eToro users can connect with, learn from, and copy or get copied by other users.
Binance
Binance is one of the largest cryptocurrency exchanges in the world. It is better suited to more experienced investors and it offers a large number of cryptocurrencies to choose from, at over 600.
Binance is also known for having low trading fees and a multiple of trading options that its users can benefit from, such as; peer-to-peer trading, margin trading and spot trading.
Polkadot (DOT/USD) could be headed to $4 next. That was after losing 3.5% on Tuesday to claim a new low in the year of $5. The cryptocurrency was trading in a clear downtrend, paving the way for further declines.
The decline in DOT price reflects the general sentiment. Most cryptocurrencies were in the red, highlighting the significant impact that the FTX collapse had on the general sentiment. DOT has now lost 15% in the week, the biggest loser in the top 15 cryptocurrencies by market cap.
It should be noted that Polkadot has been seeing a surge in activity, a highlight that the platform is still a top choice. However, bears have none of it, as the price has gone in the opposite direction. That begs the question, why is this so?
It may be time to recognise the true essence of crypto – bringing onboard decentralisation. Platforms such as Polkadot have grown because of the key role they play. Thus, the previous gains in the native tokens have largely resulted from speculation. So, when risks set in, as it is currently, a bear market is bound to follow. Going by the risk-on sentiment, the current price dynamics of DOT show we need to prepare for a prolonged bear market.
DOT price analysis as the bear market intensifies
A technical outlook of DOT shows that the bear weakness intensified after a breakout candlestick at $6. The cryptocurrency is trading with weak momentum. That has left a system of lower lows and lower highs on the weekly chart.
What next for DOT?
Following a break below $6, DOT could remain in a bearish market for a little longer. The area around $4 provided some price action and should be watched.
Where to buy DOT
eToro
eToro offers a wide range of cryptos, such as Bitcoin, XRP and others, alongside crypto/fiat and crypto/crypto pairs. eToro users can connect with, learn from, and copy or get copied by other users.
Binance
Binance is one of the largest cryptocurrency exchanges in the world. It is better suited to more experienced investors and it offers a large number of cryptocurrencies to choose from, at over 600.
Binance is also known for having low trading fees and a multiple of trading options that its users can benefit from, such as; peer-to-peer trading, margin trading and spot trading.
Polkadot price has been in a strong bearish trend in the past few days as the crypto sell-off gains steam. DOT/USD was trading at $5.631, which was slightly below this week’s high of $6. This price is also about 25% below the highest point this month.
Polkadot ecosystem challenges
Polkadot is one of the biggest blockchain networks in the world. DOT, its coin, has a total market cap of over $6 billion, making it a top-ten cryptocurrency. At its peak, it was valued at over $30 billion.
Polkadot was created by Gavin Wood, a co-founder of Ethereum, one of the biggest blockchains in the world. The two networks have a similar goal of making it possible for people to build decentralized platforms.
Polkadot’s goal is to unite networks of heterogeneous blockchain shards called parachains. A parachain is a sovereign blockchain that can have its own token. Some of the most popular parachains are Kusama, Acala, and Litentry.
The heart of Polkadot’s ecosystem is a product known as a relay chain. It is an important technology that is responsible for the network’s security, consensus and cross-chain interoperability. Bridges are also important in Polkadot’s ecosystem. They enable Polkadot shards to connect to and communicate with external networks like Ethereum and Solana.
Polkadot price has been in a strong bearish trend in the past few months. The most recent reason for the crash is the ongoing collapse of FTX, the second-biggest exchange in the world after Binance. The collapse of the company has led to fears of contagion in the industry. As a result, the crypto fear and greed index has dropped to the extreme fear level.
At the same time, there are concerns about Polkadot’s ecosystem. In the past few months, the total value locked in key parachains like MoonRiver, MoonBeam, and Acala has been falling.
Polkadot price forecast
Is it safe to buy Polkadot? The Renko chart above shows that the Polkadot price has been in a strong bearish trend in the past few months. It managed to drop below the important support level at $6.27, which was the lowest level on July 12. This price was also the neckline of the head and shoulders pattern.
DOT/USD price has moved below all moving averages while the Awesome Oscillator has moved below the neutral level. Therefore, the coin will likely continue falling as sellers target the next key support level at $5.0.
How to buy Polkadot
eToro
eToro offers a wide range of cryptos, such as Bitcoin, XRP and others, alongside crypto/fiat and crypto/crypto pairs. eToro users can connect with, learn from, and copy or get copied by other users.
Binance
Binance is one of the largest cryptocurrency exchanges in the world. It is better suited to more experienced investors and it offers a large number of cryptocurrencies to choose from, at over 600.
Binance is also known for having low trading fees and a multiple of trading options that its users can benefit from, such as; peer-to-peer trading, margin trading and spot trading.
The Polkadot (DOT/USD) ecosystem is growing, and you could be wondering whether it is time to buy the token. In our previous CoinJournal report, we highlighted how Polkadot is growing in importance in allowing blockchain connections. With that in mind, the Polkadot token is worth exploring if you seek a cryptocurrency likely to return big. But is it at the moment?
A November 14 Dot Insights data indicated that the total number of daily new accounts on Polkadot increased almost 10 times. The growth has happened in just two weeks, while the active accounts have surged 4 times. The rise has been attributed to liquidity outflow from centralised exchanges. The growth in activity on Polkadot underlines a growing influence of the blockchain.
In case you missed it, the Polkadot token is software, not security. You already know all the hullabaloo of XRP being classified as a security and the already ensuing legal battle. After years of consultation and negotiations, DOT was recognised as a non-security earlier this month. That makes the token compliant within the “Investment Contract” framework of classification of digital assets. At least, it gives the relief that the blockchain will not run into battles with the regular like the SEC.
Clearly, November could be a good month for the Polkadot token. But with the FTX concerns lingering, how is the cryptocurrency fairing?
DOT faces resistance as the price recovers from the $5.3 level
DOT recently claimed a new low for the year at $5.3. The token trades at $6.00, underlining an improved sentiment around the token.
The momentum indicator is bearish, although the weakness has slightly subsided. With the improved outlook, DOT will potentially proceed higher to find resistance around or at $6.4.
Should you buy DOT now?
The general trend is bearish for the Polkadot token. Although we expect the price to find some footing in the next few days, the risk-reward ratio to the resistance level is unattractive.
DOT must find a directional momentum to the upside to consider a buy. Still, the token is attractive for long-term buy-and-hold.
Where to buy DOT
eToro
eToro offers a wide range of cryptos, such as Bitcoin, XRP and others, alongside crypto/fiat and crypto/crypto pairs. eToro users can connect with, learn from, and copy or get copied by other users.
Binance
Binance is one of the largest cryptocurrency exchanges in the world. It is better suited to more experienced investors and it offers a large number of cryptocurrencies to choose from, at over 600.
Binance is also known for having low trading fees and a multiple of trading options that its users can benefit from, such as; peer-to-peer trading, margin trading and spot trading.
After a depressing market, cryptocurrencies are turning up again. On Wednesday, Polkadot (DOT/USD) posted a 7% gain and was back to its resistance at $6.48. Polkadot was one of many tokens to record gains. Ethereum was easily the top gainer coin among the top cryptocurrencies, adding 14% in the day. Bitcoin was up 7% on the same day.
The Wednesday gains were a testament that crypto investors are still active. No notable developments were driving the surge. Instead, the cryptocurrencies were building on their previous developments to make a comeback. Ethereum’s substantial gains were largely a result of its Proof-of-Stake shift, which has been less influential in pricing to date.
For Polkadot, we know that the blockchain has been positioning itself to become the smart contract platform of choice. In particular, Polkadot’s parachains have been touted as a key to blockchains’ interoperability. During the Token2049 conference in September 2022, Parity Technologies CMA Peter Ruchatz shared thoughts on Parachains. He said, in reference to the Polkadot parachains, that blockchains will grow through interoperable systems.
Fast forward, Ethereum’s POS shift happened in September. Ruchatz explains that several blockchain participants are considering connecting to Ethereum via Polkadot. Potentially, Polkadot and its native token DOT will benefit from the Ethereum Merge.
DOT recovers to or slightly above the $6.48 resistance
Source – TradingView
Technically, DOT has overcome a short-term descending trendline. The price pumped but has met resistance at $6.48. The resistance coincides with the 50-day MA. DOT has never recovered above the 50-day MA since mid-August.
Should you buy DOT?
There is no doubt about the long-term bull case for DOT. The blockchain is attracting praise due to its ability to enable blockchain communication. Thus, any value investor would consider DOT attractive, given its low prices from the previous highs.
The litmus test for DOT now shifts to whether the cryptocurrency will successfully clear $6.8. Don’t get it wrong, the cryptocurrency trades at $6.51, but the price cannot be recognised as a breakout yet. We need to see a bull candlestick closing higher to make a bull call.
Where to buy DOT
eToro
eToro offers a wide range of cryptos, such as Bitcoin, XRP and others, alongside crypto/fiat and crypto/crypto pairs. eToro users can connect with, learn from, and copy or get copied by other users.
Binance
Binance is one of the largest cryptocurrency exchanges in the world. It is better suited to more experienced investors and it offers a large number of cryptocurrencies to choose from, at over 600.
Binance is also known for having low trading fees and a multiple of trading options that its users can benefit from, such as; peer-to-peer trading, margin trading and spot trading.