- Polkadot (DOT) experienced a temporary 3% uptick but maintains an overarching bearish trend across multiple time frames.
- The asset’s recent bounce to $4.6 could potentially offer a ripe entry point for short-sellers.
The Volatility Spectrum: Parsing Polkadot’s Recent Price Activity
Polkadot (DOT), a decentralized protocol enabling different blockchains to transfer messages and value, recently demonstrated a minor surge of nearly 3% within the last 48 hours. Yet, this ascendant flicker appears enveloped in a broader downtrend, as evidenced by the cumulative volume delta (CVD) of the spot market, which has consistently been bearish. This prompts sophisticated traders to speculate: Could this recent uptick serve as an attractive entry point for short-selling?
The Tug-of-War Between Bulls and Bears
While DOT exhibited a bullish breach on its lower time frame a few days ago, the market’s upward zeal was abruptly squashed at the $4.8 resistance level. This downturn immediately penetrated the $4.3 support level, establishing that the asset’s short-lived rebound was nothing more than a mirage.
On a 1-day chart, DOT hovers at around $4.28. Interestingly, the asset touched $4.56 recently but failed to consolidate this move. The pullback from $4.8 to $4.3 was a lucid gesture of control from sellers. This transformative shift transmuted a previously bullish order block into a bearish breaker, indicating potential short-selling opportunities should DOT muster the energy to revisit the $4.4-$4.6 zone.
Market indicators such as Fibonacci extension levels insinuate that DOT could plummet to sub-$4 in Q4 of 2023. The projected trajectories, aligned with 23.6%, 50%, and 61.8% extension levels, rest at $3.894, $3.495, and $3.317 respectively. Given the ongoing bearish structures and the downtrend manifest in the 1-day chart, these sub-$4 levels could indeed become a reality.
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Market Sentiment: A Bearish Consensus
Open Interest, a critical measure of market sentiment, surged when DOT transitioned from $4.45 to $4.26. This indicates a significant inflow of short-sellers eager to capitalize on DOT’s bearish outlook. In this context, the recent 3% bounce appears less a signal of an impending bullish reversal and more a siren call, luring traders into potential short-selling traps.
The asset’s CVD, staying on a downward trajectory, further underscores the prevailing sentiment. The lack of robust buyers amplifies the narrative of persistent selling pressure, solidifying the premise that DOT might continue its descent in the near term.
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