Although there is some remaining positivity, the cryptocurrency Polkadot [DOT] is struggling to gain significant momentum across different time periods. With a 2.18% decrease in daily trading, it is likely that downward pressure will continue.
The anticipated decline is a result of diminishing buying pressure as traders become less optimistic. Nevertheless, there is still an underlying bullish sentiment, indicating the potential for a recovery once market conditions improve.
DOT Charts a Short-Term Decrease Amid Pressure in the Supply Zone
In chart analysis, DOT is currently experiencing a short-term decline while operating within an overall upward channel – a bullish pattern. The cryptocurrency recently faced resistance in a supply zone ranging from $4.512 to $4.563, contributing to its current price drop.
This resistance led DOT to break below its initial support level at $4.258, coinciding with the Fibonacci retracement level at the same point. It is now approaching the next support level at $4.182, as indicated by Fibonacci levels.
If selling pressure escalates, DOT could potentially drop as far as $4.086 before stabilizing and potentially resuming its upward trajectory.
The current selling pressure is expected to continue, with on-chain data signaling a bearish sentiment among traders towards the asset.
Impact of Ripple Effect on Polkadot as Trader Confidence Wanes
On-chain metrics suggest that trader confidence in DOT is diminishing, likely causing a short-term decrease in the asset’s value.
According to figures from Coinglass, Open Interest (OI) – which monitors the number of unresolved derivative contracts, particularly futures trades – has shown a noticeable decline.
Recently, DOT’s OI fell by 1.43%, reaching $229.07 million. This implies an increase in short contracts, with traders increasingly betting on a further decline in DOT’s value.
Supporting this trend, liquidation data reveals a rise in losses for long traders who were previously optimistic about price increases but are now feeling the impact of growing bearish sentiment.
Out of the $136.72 thousand worth of trader positions liquidated, long traders accounted for $123.21 thousand, reflecting a shift towards predominantly short positions in the market.
Are Bulls Searching for More Profitable Entry Points?
Despite the recent setback, DOT continues to follow a bullish trend and is trading within an ascending triangle – a pattern that indicates potential upward movement. Intriguingly, CryptoCrypto has identified another bullish signal, affirming continued strength.
Current data from Coinglass indicates that Exchange Netflow has been largely negative on both daily and weekly scales.
A negative netflow typically suggests that traders are withdrawing assets from exchanges, indicating their intention to hold onto assets rather than sell – a bullish sign.
With $274.82 thousand and $3.59 million in Exchange Netflow recorded on the daily and weekly timescales, overall market sentiment remains bullish.
The recent price decline may be attributed to bulls seeking the perfect entry point to accumulate DOT in bulk.