Analyzing Polkadot’s Price Movement: What Lies Ahead for DOT?
Throughout this month, Polkadot’s native token DOT has been experiencing a decline, signaling a period of profit-taking following its impressive gains in November. Despite this downturn, there are indications that bullish momentum may soon return to the cryptocurrency.
Recent trends showed a predominantly bearish run for DOT earlier this week, with prices dropping to a low of $7.16. However, it is worth noting that the cryptocurrency found strong support at this level, particularly as it entered the 0.5 and 0.618 Fibonacci retracement range, hinting at a possible reversal.
Currently, DOT has started to exhibit signs of decreased selling pressure over the last 24 hours, alongside some accumulation activities.
Evaluating DOT’s Future with On-chain Metrics
The latest developments may signify the conclusion of the recent pullback and potentially pave the way for renewed demand. On-chain data provides insights that support the notion of such a shift, indicating a positive outlook.
For instance, spot flows were negative from mid-December but turned positive within the last 24 hours, with DOT seeing approximately $2.01 million in spot inflows on Thursday morning.
The reversal in spot flows suggests that investors are anticipating a re-entry within the Fibonacci zone mentioned earlier, reflecting strong potential demand for DOT, despite recent setbacks.
While concerns loomed regarding a further downtrend for DOT, signs beyond spot outflows and Fibonacci zone retests indicated a sentiment shift in the derivatives market.
The DOT longs vs shorts ratio experienced a notable change, with around 93.35% of all DOT/USD perpetual addresses on Binance being long. Although the overall ratio across multiple exchanges still favored shorts, the long positions have shown slight improvement in the past three days.
There remains a possibility of DOT continuing its downside trajectory, as evidenced by the increasing funding rates over the last four days, reflecting an accumulation of long positions compared to shorts.
Furthermore, it is important to consider that DOT’s mid-week decline was influenced by broader market performance, particularly following the negative reaction to the latest FED meeting.
With prices dipping below $8, traders might view this as an opportunity to accumulate DOT at a discount. In the case of a strong resurgence in demand, DOT could potentially witness a 52% rally from its current level towards the next resistance zone.