Last week witnessed a significant downturn for Polkadot [DOT] as it faced a substantial decline in its market capitalization, resulting in a double-digit drop in value. However, the recent developments suggest a potential comeback for DOT, with the token currently testing a crucial support level.
Polkadot Facing a Decision Point
Data from CoinMarketCap indicated that DOT saw a price decrease of over 17% in the previous week. As of the latest data, the token was being traded at $7.08, holding a market cap exceeding $10 billion.
In the midst of this, World Of Charts, a respected crypto analyst, shared insights on Polkadot’s recent movements. The analyst’s tweet highlighted DOT’s bounce from a critical trading range and its current testing of a key support level.
If the support holds, a potential new bullish rally could be triggered, propelling DOT to achieve new peaks. The analyst’s projections indicate a possible surge towards $30 in the near future.
Can DOT Succeed in the Test, or Will Further Declines Follow?
An analysis by CryptoCrypto revealed that while DOT experienced a significant price correction, there was a drop in weighted sentiment post a spike on December 18th.
A decrease in this sentiment metric signifies a growing bearish outlook among market participants towards the token. Interestingly, the token witnessed an uptick in social volume during the downtrend, indicating increased discussions among investors regarding Polkadot.
However, one of Polkadot’s derivative metrics showed promise, hinting at a favorable outcome in the support level test.
According to data from Coinglass, the long/short ratio for DOT rose within the 4-hour timeframe, indicating a higher number of long positions compared to short positions. This uptrend reflects a strengthening bullish sentiment surrounding Polkadot.
Despite the positive signals from derivatives, the Relative Strength Index (RSI) revealed a different narrative. With a recent decline and a current value of 39, the RSI indicates an increase in selling pressure on the token, often leading to price corrections.
Evaluating Polkadot’s Network Activity
Alongside the price challenges, data from Artemis highlighted a decline in Polkadot’s network activity.
The daily active addresses on the blockchain witnessed a sharp decrease in December, consequently impacting the daily transaction volume on the network.