There is a possibility that Polkadot’s native coin, DOT, could witness a surge in its value as excitement returns to the market. Nevertheless, this altcoin recently experienced a failed breakout attempt from a crucial wedge pattern.
Since December, DOT has been following a downward trend, with the $6 price point acting as a strong support level. On the other hand, a descending resistance line has been capping the upper limits of its movement. These distinct levels of support and resistance indicate the wedge formation that DOT has been trading within for the past seven weeks.
A breakout from the descending resistance trend was observed last week, fueling optimism for potential gains in the near future. However, the breakout proved to be short-lived as the price retraced approximately 12% over the last two days, settling at $6.61 at the time of writing.
The recent pullback during the weekend indicated a lack of substantial demand to drive a significant upwards movement.
Notably, there has been a resurgence of enthusiasm in certain altcoins and positive liquidity flows over the last 48 hours.
Is Polkadot Poised for Another Breakout Attempt?
The discounted price of DOT has presented an attractive opportunity for buyers to enter the market close to the support level.
A potential strong rally would likely be supported by a renewed interest from both traders and investors. Address activity had dropped to 5,154 addresses on January 11, marking the lowest level seen in the past three months.
On the other hand, active accounts surged to a recent peak of 8,038 active addresses by January 17. Additionally, new addresses saw a notable increase from 1,459 addresses to 2,069 addresses over the last two days, indicating that a significant number of holders are anticipating a rebound from the support zone.
The uptick in address activity was also reflected in DOT’s Open Interest, which rose from $439.02 million on January 14 to $524.36 million on January 18. However, the current figure stands at $475 million at the time of publication.
According to Coinglass, DOT registered spot outflows exceeding $10 million in the last two days, aligning with the coin’s declining Open Interest and price action.
The increase in spot flows indicates that DOT traders are primarily focused on short-term profit realization. Data on liquidations revealed that slightly under $3 million in long positions were liquidated in the past two days.
These liquidation events suggest that there is relatively low leverage being used in long positions, which might pave the way for accumulation. However, current data implies that DOT has not been commanding significant attention in the market.