Despite some lasting positive outlook, Polkadot [DOT] has encountered challenges in gaining significant traction across different time periods. Following a 2.18% decrease in daily trading, it is expected that the downward trend will continue.
The projected decline is a result of diminishing buying pressure as trader sentiment weakens. Nevertheless, there is an underlying bullish tone, indicating the potential for a recovery once market conditions improve.
DOT Observes Short-term Decline Amid Pressure in Supply Zone
DOT is witnessing a short-term downturn on the charts, despite operating within an overall upward channel—a bullish trend. The asset recently faced resistance in a mid-range supply zone ranging from $4.512 to $4.563, leading to its current fall in price.
This pressure caused DOT to slide below its initial support level at $4.258, which also coincides with the Fibonacci retracement level at the same point. The price is now moving towards the next support level at $4.182, as indicated by Fibonacci levels.
If the selling pressure escalates, DOT could drop to as low as $4.086 before stabilizing and potentially resuming its upward trajectory.
The existing selling pressure is expected to linger, supported by on-chain data indicating a prevailing bearish sentiment among traders towards the asset.
Impact of Ripple effect on Polkadot as Trader Confidence Wanes
On-chain analytics reveal a diminishing trader confidence in DOT, likely exerting downward pressure on the asset in the near term.
According to data sourced from Coinglass, Open Interest (OI)—which monitors the number of unsettled derivative contracts, particularly futures trades—has experienced a noticeable decrease.
Recently, DOT’s OI fell by 1.43%, reaching a value of $229.07 million. This hints at an increase in short contracts, with traders increasingly betting on further declines in DOT’s value.
Liquidation data corroborates this trend, with long traders facing increased losses as their optimistic outlook on a price surge diminishes in response to the growing bearish sentiment.
Out of the $136.72 thousand in trader positions liquidated, long traders accounted for $123.21 thousand, indicating a shift towards predominantly short positions in the market.
Are Bulls Hunting for More Profitable Entry Points?
DOT continues to ride on a bullish trend, trading within an ascending triangle—a pattern that hints at potential upward movement. Notably, CryptoCrypto has identified another bullish indicator, reinforcing the signs of ongoing strength.
At the time of publication, data from Coinglass highlights that Exchange Netflow has been largely negative on both daily and weekly timeframes.
Negative netflow typically suggests that traders are withdrawing assets from exchanges, indicating an intention to hold rather than sell—a bullish indication.
With daily and weekly Exchange Netflow of $274.82 thousand and $3.59 million respectively, the overall market sentiment remains bullish.
The recent price dip could be attributed to bulls seeking an optimal entry point, preparing to accumulate DOT in larger quantities.