- DOT became oversold after a recent bearish period pushed it to a three-year low.
- The low level of investor excitement indicated that recovery may not be so easy.
Polkadot’s native cryptocurrency DOT could make most investors reconsider their decision after its latest performance. The downward trend continues to expand and has reached a new local low.
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In summary, DOT has had an overall bearish performance since February. The press time price represented a 53% drop from its peak price in 2023. At the time of writing, it was exchanging hands for $3.67. More importantly, this week’s extended crash saw the altcoin hit a new three-year low.
Source: TradingView
An important point to note is that DOT was oversold. Hence the likelihood that demand will increase again. However, there is something traders need to know before embarking on another episode of buying the dip.
Despite the current circumstances, liquidity may not be as available
There was also a significant chance that DOT would struggle to bounce back. This was because low liquidity starved the markets. It may also take a while for strong liquidity to make a comeback in the altcoin segment.
$POINT continues to set new lows.
Altcoins only do well after liquidity returns to the market, and until the Fed turns again, this is unlikely to happen. pic.twitter.com/t28y97sGpg
— Benjamin Cowen (@intocryptoverse) October 12, 2023
At the time of writing, there was some uncertainty about DOT’s ability to bounce back strongly. A dip of the last magnitude is often accompanied by a strong recovery. However, sentiment at the cryptocurrency’s press time suggested that investors were not as confident about the recovery. The latest data from the Weighted Sentiment metric shows little interest in DOT.
Source: Santiment
DOT’s On-chain volume also indicated a lack of excitement, as volume was still within the normal two-week range. A review of the derivatives market showed that financing rates were still negative. A sign that the bulls could struggle to make a sharp recovery possible.
Source: Santiment
These findings may indicate that DOT could continue to extend its bearish price action in the coming weeks. Alternatively, selling pressure may subside, followed by sideways price action. While these are theoretical scenarios, traders should keep in mind that Polkadot has just started its latest parachain auctions.
A new Polkadot parachain auction has started
Check out today’s #PolkadotDigest
https://t.co/KD5LRBYCJ6
— Polkadot (@Polkadot) October 12, 2023
If you’re hoping this can create enough bullish demand, expect to be disappointed. Parachains can encourage the purchase of DOT by those who want to support the auctions. However, the level of demand is usually too low to have a significant impact on the price of DOT.
Read more about DOT’s 2024 price forecast
Although parachains have no influence on the price, they are an important part of Polkadot’s activities. They emphasize the fact that new projects will soon be started, which could possibly contribute to the expansion of the network.
