- DOT price action retreated after its previous uptrend failed to generate enough liquidity.
- The level of demand or selling pressure could be key, especially as market enthusiasm increases
Polkadot’s native cryptocurrency DOT could be a good candidate for a bull rally as enthusiasm returns to the market. However, the altcoin just recorded a failed attempt at a major breakout from its wedge pattern.
In fact, DOT has been in an overall downtrend since December. However, so far it has demonstrated support at the $6 price level. Meanwhile, the upper limits of the trend were limited by a descending resistance line. These support and resistance levels highlight the wedge pattern that DOT has been trading in for 7 weeks now.
DOT managed a midweek breakout of this descending resistance trend last week, raising hopes for further upside in the coming days. The breakout was, however, short-lived as the price fell by around 12% over the last 2 days to reach its press time price of $6.61.
Source: TradingView
The weekend’s decline highlighted the absence of strong enough demand to support a significant increase.
Interestingly, market conditions over the past 48 hours have demonstrated a return of enthusiasm for certain altcoins and positive liquidity flows.
Is the DOT ready for another attempt?
The reduced price of DOT also provided buyers with the opportunity to move closer to the support level.
A strong comeback will likely be supported by renewed interest among traders and investors. Address activity recently dropped to 5,154 addresses also on January 11 – the lowest levels in the last 3 months.
source: Polkadot.subscan.io
Active accounts rebounded to a recent high of 8,038 active addresses on January 17. New addresses also increased significantly, from 1,459 addresses to 2,069 addresses in the last 2 days. This confirmed that a significant number of holders were expecting a bounce from the support range.
The increase in address activity was reflected in DOT’s open interest, which increased from $439.02 million on January 14 to $524.36 million on January 18. However, the corresponding figures had dropped to $475 million at the time of writing.
According to Coinglass, DOT has seen spot outflows worth over $10 million in the last 2 days. This appears to align with the altcoin’s negative open interest and falling prices.
source: Coinglass
The increase in spot flows confirmed that DOT traders are still focused on taking short-term profits. In fact, liquidation data revealed that long liquidations worth just under $3 million took place over the past two days.
These liquidations revealed that relatively small funds were allocated to leveraged long positions. This may encourage hoarding, but for now the data suggests DOT has not received much attention.
