After a notable 21.81% increase in the past week, the price of Polkadot’s cryptocurrency, DOT, has started to show signs of a potential downturn. As of the current moment, DOT has decreased by 1.81%, indicating a possible further decline in the near future.
A recent analysis by CryptoCrypto has identified the next key level for DOT, hinting at a potential area for a rebound to take place.
Growing Bearish Sentiment Impacts DOT’s Market
The prevailing market outlook suggests that DOT could be on track for a continued decline from its current price levels.
Traders seem to be contributing to a bearish trend by transferring their DOT holdings from private wallets to exchanges for selling. Recent data shows Exchange Netflows amounting to $125.72 million worth of DOT flowing into exchanges, indicating significant selling activity.
Furthermore, a large number of long positions have been liquidated, with $1.21 million worth of positions being closed in the last 24 hours. This emphasizes the losses incurred by traders who were expecting a price surge.
On the other hand, only $151,000 in short positions have been closed, creating an imbalance that favors bearish market conditions.
Predicted Decline in DOT – Identifying Potential Support Levels
According to technical analysis from CryptoCrypto, DOT’s next support level can be pinpointed on the charts. The current price trends indicate a potential drop towards $4.484, where crucial support may trigger an upward movement. If buying interest strengthens at this level, DOT could surge by 73.39% and reach $7.75.
In the event that this support level fails, DOT might further decline towards a lower support level at $3.940, where sufficient liquidity could facilitate a price recovery. However, a consolidation phase may be necessary at this level, as observed previously.
Signs of Potential DOT Correction Through Liquidity Outflows
Indicators like the Money Flow Index (MFI) and Chaikin Money Flow (CMF) suggest a downtrend for DOT.
While these indicators, which analyze volume and price movements to assess market sentiment, are currently positive, they have been declining. Presently, MFI shows a reading of 56.99, and CMF displays 0.20, both indicating positive trends.
Despite the positive readings, the downward trends in MFI and CMF may signal a temporary retracement rather than a complete reversal. Hence, though the current price action for DOT looks optimistic, the decline could be short-lived before a potential upward continuation.