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Is Polkadot eyeing $100 next? DOT price jumps 25% triggering classic bullish chart pattern

The bullish outlook appears as Polkadot prepares to auction highly anticipated parachain slots on its network.

Polkadot (DOT) looks poised to rally toward $100 in the coming sessions as it triggers a classic bullish reversal setup.

Dubbed Inverse Head and Shoulders (IH&S), the technical structure appears when an instrument forms three troughs in a row, with the middle one, called the Head, being the lowest, and the other two — known as the right and left shoulders — of almost equal heights. 

Meanwhile, the level at which all the troughs top out represents the "neckline."

So it appears DOT has been forming an IH&S ever since its price correction from the $43-$49 price range (neckline), as shown in the chart below. On Nov. 1, the Polkadot token broke above the area and continued rallying the next day to bring its month-to-date returns to almost 25% while bumping its record high to $53.35.

DOT/USDT daily price chart featuring IH&S pattern. Source: TradingView

The price jump accompanied an increase in trade volumes, showing that traders supported the move above the IH&S neckline. As a result, DOT's prospects of rising by as much as the maximum distance between its IH&S's head and neckline (~$39) improved.

As a result, Polkadot's profit target out of its IH&S setup comes out to be near $90, with possibilities of extended rallies toward $100, a psychological resistance level.

Parachain auction FOMO

Polkadot's latest price rally came as traders' focus shifted on its highly anticipated parachain auctions on or around Nov. 11.

The Polkadot team announced Monday that their council had passed the motion that enables parachain registrations and crowdloan beginning Nov. 4, adding that the proposal now awaits a go-ahead via a public referendum.

In detail, crowdloans enable rivaling projects to raise capital via DOT to bootstrap their parachain auctions.

Therefore, those who support the projects lock their DOT into a sponsored account for a predefined period. In return, they receive rewards in the form of air-dropped tokens from the project competing for the parachain slot.

Kusama fractal

In June, Polkadot's test-net chain, dubbed Kusama (KSM), conducted a similar parachain slot auction in June. The protocol ended up proving the effectiveness of the crowdloan mechanism as users contributed more than 1.11 million KSM across the five parachain auctions.

KSM supply dedicated to its first five crowdloans as of Aug. 6. Source: Subscan, Messari

That represented over 10% of the total KSM supply locked.

Related: Kusama network set to launch its next five parachain auctions

The KSM price rallied in the days leading up to the auction in June. It peaked out on May 16 at around $645 and then dropped over 78% to $138.50 two months later. The selloff also surfaced amid an overall crypto market decline, led by China's full-fledged ban on crypto activities.

KSM/USDT daily price chart. Source: TradingView

Hence, it appears DOT has also been undergoing the so-called "buy-the-rumor" price rally as traders bet higher on the parachain auction event. But in the absence of a China-like event, the cryptocurrency looks to be pursuing the IH&S setup mentioned above.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

Digital Asset Powerhouse Wyden Snags $16.4M in Funding, Eyes Global Expansion

Polkadot eyes breakout to $75 after DOT price rally sets up classic bullish reversal

The inverted head and shoulders pattern hints at a decisive breakout move in the Polkadot market.

Polkadot (DOT) chart technicals suggest it may rally to a new record high near $75 if DOT can manage to close above its $41–$43 range decisively.

That’s according to a classic bullish reversal setup known as an inverse head and shoulders (H&S) that forms when the price undergoes three selloffs during a period of market consolidation.

Specifically, the pattern contains an initial selloff, followed by a short-term price rally and another — deeper — selloff. That leads to one more small correction to the upside, followed by another selloff that bottoms out near/at the lowest level of the first selloff.

Inverse head and shoulders pattern illustration. Source: ThinkMarkets

The first and last selloffs represent “left” and “right” shoulders, respectively, while the second selloff represents the “head.” On the other hand, the level around which all the short-lived rallies top out represents the “neckline” of the head and shoulders pattern.

Traditional analysts typically calculate the H&S upside target from the neckline resistance by measuring the maximum distance between it and the head formation.

So, it appears that Polkadot has been forming a similar bullish pattern on its weekly chart, as shown below.

DOT/USD weekly price chart featuring inverse head and shoulders setup. Source: TradingView

The maximum distance between DOT’s neckline and the head’s bottom comes out to be nearly $31. Therefore, a successful bullish breakout above the neckline range of $41–$43 puts the next long-term target at approximately $75.

Parachain auctions coming in November

The inverse H&S pattern emerged as DOT rallied by almost 30% this past week to reach a five-month high at around $44. At the core of its weekly uptrend was a price boom across the crypto market, as well as the news of Polkadot’s first parachain auctions going live on Nov. 11.

In detail, Polkadot’s parachains are parallelized, application-specific chains — child ledgers tethered to a single parent ledger called the Relay Chain. Due to their parallel nature, parachains tend to process multiple transactions simultaneously and maintain and record their data on the main ledger by communicating with other chains.

Related: Polkadot to debut parachain auctions after governance vote

That comes as a break from the method of queuing transactions and processing them sequentially.

DOT, which serves as a utility token for fees, governance, interoperability and bonding inside the Polkadot ecosystem, rallied by more than 24% after the parachain auction announcement.

Next, Polkadot aims to introduce a cross-chain feature that will enable its Relay Chain to external blockchains (Bitcoin, Ethereum, etc.) via specialized smart contracts. Meanwhile, the project also plans to launch “in-built bridging modules” that will enhance the interoperability of external blockchains with Polkadot. 

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

Digital Asset Powerhouse Wyden Snags $16.4M in Funding, Eyes Global Expansion

Polkadot (DOT) and Kusama (KSM) skyrocket in price after attracting $30M in funding

Polkadot and Kusama prices rose as Master Ventures announced a $30 million Polkadot ecosystem fund.

Polkadot (DOT) and Kusama (KSM) rose in tandem on June 3 as traders assessed a venture capital firm's major investment into their blockchain ecosystems.

Dubbed as Master Ventures, an Asian blockchain incubator and venture capitalist announced that it had launched a $30 million venture capital fund called Master Ventures Polkadot VC Fund. In a press release published Wednesday, the firm said that its fund would "support and finance the Parachain bids" of tier-1 blockchain projects that want to win a Parachain slot on the Polkadot Relay Chain.

Master Ventures also noted that its proceeds would also assist early-stage projects in launching atop the Polkadot and Kusama ecosystems.

Traders took the announcement as their cue to raise their bids on DOT and KSM pairs. Their sudden interest allowed the DOT/USD exchange rate to rise by up to 27.91% to $29.21 from its Wednesday opening rate. Meanwhile, Kusama's KSM/USD climbed 39.35% to $511.91 in the same period.

Twin rallies in Polkadot and Kusama markets. Source: TradingView

The wild moves uphill accompanied bullish outlooks across the social media, with widely-followed analysts predicting upside continuation in both the Polkadot and Kusama spot markets. 

At the root of bullish analogies lied a promise that Master Venture's $30 million investment into the Polkadot ecosystem would lead to a speedier auctioning of its "Parachain slots." In retrospect, a Parachain is equivalent to a blockchain (layer 1) tied to one particular functionality, with its own specialized characteristics and governance structure.

For example, one can bid for the Polkadot Parachain slot to, say, build a decentralized oracle network atop it. As a result, the outcome would be an application-, users-, and liquidity-specific unique blockchain that would be able to query data from other Parachains, with Polkadot acting as a layer 0 solution — a node — that enables communications between its undertaken blockchains. 

Meanwhile, Kusama is an experimental version of Polkadot but exists as an independent blockchain network. It functions as a sandbox for developers that want to test pre-release versions of their projects before deploying them on Polkadot's mainnet.

Potential demand for DOT and KSM

Developers bidding for Parachain slots on Polkadot and Kusama would need to use the projects' native assets, DOT and KSM, respectively.

Master Ventures' $30M fund intends to support and finance these developers and their tier-1 projects. That means the venture capital firm would need to purchase DOT and KSM tokens to back the Parachain auction's bids. In turn, Polkadot and Kusama would lock the tokens for as long as the developers want to run their project on their parachains — ranging from six months to two years.

If the Polkadot ecosystem succeeds, it would mean an always-increasing amount of DOT and KSM tokens locked for the duration of the parachain slot. As a result, their total supply in circulation would deplete. That may somewhat explain why traders have suddenly turned bullish on DOT and KSM.

Mira Christanto, a researcher at crypto data analytics firm Messari, wrote in one of her posts from May that 65% of DOT supply has been staked. Meanwhile, 30% of DOT remains in circulation. Therefore, the upcoming Parachain auction would take more Polkadot tokens out of circulation. Christanto added:

"After the parachain launch, 40% of DOT could be bonded in parachains, hence reducing effective circulating supply to only 15%."

Conversely, a lower turnout for Polkadot and Kusama's Parachain auctions could leave DOT and KSM with a lower-than-expected demand, risking spot price corrections.

Digital Asset Powerhouse Wyden Snags $16.4M in Funding, Eyes Global Expansion