DOT crashes 8% weekly, but is a bear trap possible? (Polkadot Pricing Analysis)

Polkadot has seen a lack of demand and intensified selling activity, indicating bearish sentiment in the market. There has been a sudden breach below the crucial $6 support region, which has triggered a cascade of long sell-offs and may lead to a sustained downtrend, unless it turns out to be a false breakout.

Technical Analysis

By Shayan

The daily chart

The daily chart reveals that Polkadot has faced aggressive selling near the critical $6 support region and experienced bearish pullbacks, highlighting the lack of sufficient demand.

The price has breached substantial support at $6, aligning with the lower boundary of a multi-month triangle and with previous major swing lows, showing a notable bearish sign.

Also, the 100-day moving average is about to cross below the 200-day moving average, indicating a death cross. This evolution further indicates the prevailing bearish sentiment in the market. A sustained bearish trend towards lower price levels is likely if the breakout is confirmed with a successful pullback.

Source: TradingView The 4-hour chart

On the 4-hour chart, Polkadot faced a major rejection near the $6.8 supply zone after an impulsive rally, completing a retracement to the breakout region and verifying the initial breakout, indicating dominance of the sellers.

Upon reaching the crucial $6 support region, the bearish momentum initially faded, resulting in slight fluctuations. Near this fundamental threshold, the price had formed a descending wedge pattern, suggesting the possibility of a bullish reversal.

However, the sellers eventually dominated, breaching the lower limit of the pattern and the important $6 support region. This bearish breakout could end up being false, indicating a bear trap.

Therefore, the price action of the next few days will determine the validity of the breakout. If a pullback occurs and holds below the $6 mark, a continuation of the downtrend will be imminent.

Source: TradingView Sentiment Analysis

By Shayan

Polkadot price is going through some significant bearish activity and has broken below the crucial $6 support region. Futures market sentiment analysis can provide valuable insight into the possible future path of the cryptocurrency.

The attached chart presents Polkadot’s price along with open interest (OI) and funding rate metrics. The recent bearish decline is reflected in a significant drop in the OI metric, reaching its lowest value. This indicates a lack of interest among market participants to take aggressive long positions, suggesting that the futures market has cooled with minimal activity.

Usually, this scenario is not favorable for the price, especially when it is accompanied by negative or close to zero funding rate values. Low open interest coupled with negative funding rates suggest a prevailing bearish sentiment in the market. Unless a reversal in the next few days brings demand back into the market, the bearish trend is likely to continue.

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