• Investing in Polkadot has become a viable option as DOT’s market capitalization has grown to $6.34 billion.

  • Sentiment on DOT changed as more bullish positions were established.

Recent price movements are largely a function of broader market trends. If you are considering investing in Polkadot, it is prudent to analyze the asset's inherent strengths and weaknesses in order to make an informed decision.

Polkadot [DOT], like the rest of the market, saw a major correction as crypto leader Bitcoin [BTC] fell to $26,000 levels. Last week, DOT’s value fell by more than 8%, while monthly losses surged to 16.55%.

However, the coin regained some ground as it battled bears, reaching $5.36 at time of publication, up a notable 2% in 24 hours. DOT’s market capitalization increased to $6.34 billion, ranking it at No. 11, closing in on the coveted top 10 spot.

Getting started with Polkadot

Created by Ethereum [ETH] founder Gavin Wood and introduced via a white paper in 2016, Polkadot is a nominated proof-of-stake (NPoS) blockchain network designed to allow blockchains to operate without a trusted third party Exchange messages and execute transactions with each other.

These interconnected, application-specific layer 1 chains are called parachains, and they are plugged into a single underlying platform called the relay chain. The relay chain acts as the governance layer of the network, protecting, governing, and connecting parachains.

Therefore, Polkadot is a “multi-chain” composed of blockchains running concurrently to speed up transactions. It is estimated that the network can process an average of 1,000 transactions per second (TPS). As part of the roadmap shared last September, Polkadot announced a major scalability improvement that will increase network speeds to 100,000 and 1 million TPS.

Polkadot’s arsenal—parachains

Polkadot’s unique parachain characteristics have attracted unanimous attention from developers and investors. Developers can link blockchains to the Polkadot system or even create entirely new blockchains to serve specific use cases.

Polkadot limits the number of parachains it can support to around 100. Due to limited supply, parachains are distributed through auctions, governance systems, or parachains

According to the latest data from CoinMarketCap, the total number of parachains in the Polkadot ecosystem, including the Kusama network, is 45. The Kusama blockchain is part of the Polkadot ecosystem and is used to trial new features before they are released to the mainnet.

Polkadot and Kusama are closely related as they are built on almost the same code base.

According to Token Terminal, the total number of core developers on Polkadot and Kusama was 300 on May 11. This ranks high on the development activity chart for L1 solutions. Although, this is down 11% from last month.

Still, Polkadot remains one of the cryptocurrency’s largest developer ecosystems, with its number of full-time developers growing more than 16x since 2018, according to Messari’s Q1 2023 report on the state of Polkadot.

High-profile partners

Polkadot’s partnerships with well-known brands from multiple industry sectors have been instrumental in the company’s recent growth.

Recently, Deloitte, the world's largest accounting firm, has entered the Polkadot ecosystem. According to a Twitter announcement, Deloitte will leverage products from the KILT protocol, a Polkadot parachain. This will support its Know Your Customer (KYC) and Know Your Business (KYB) processes.

Apart from this, cloud computing giant Amazon Web Services (AWS) has pledged to donate $250,000 to India’s official Polkadot community, Polkadot Now India, according to a report by Financial Express. The grant will fund 50 projects built on the Polkadot network.

Are traders bullish on investing in Polkadot?

The increase in the number of collaborations has a strong impact on market sentiment for DOT, the ecosystem’s governance token.

Despite the price correction, weighted sentiment has moved into positive territory. Therefore, investors can place bullish bets on the coin in the short term. Additionally, the number of mentions of the coin across crypto-focused social channels has increased over the past 24 hours.

The slight recovery comes after a sharp drop in DOT’s active trading positions, or open interest (OI). At press time, OI’s face value reached $158 million, up 1.25% in the past 24 hours, Coinglass reported.

As mentioned earlier, most new positions are betting on DOT’s price growth. This is shown by the sharp rise in the long/short ratio.

Fluctuations in price and market sentiment are an important part of trading speculative assets such as cryptocurrencies. Therefore, it is recommended that you conduct due diligence before investing.