At press time, interest in Polkadot is growing. CoinMarketCap shows that DOT’s trading volume has increased by more than 20% in the past 24 hours.
In addition to rising volume, there are several indicators that suggest the trend may be reversing.
Key reasons why DOT can overcome resistance
Bulls have pushed DOT past the $4.27 resistance level. The price has been a strong resistance for nearly two weeks, but has led the market higher as the broader market has steadily surged, boosting sentiment.
The relative strength index (RSI) shows that momentum is shifting. An RSI of 50 indicates that the sentiment has shifted from negative to neutral.
The rising RSI has also crossed above its signal line, suggesting that a bullish trend is underway.
Currently, DOT has managed to break above the 50-day Simple Moving Average (SMA) at $4.28. This has turned the short-term sentiment bullish and the price is expected to rebound to test the next resistance at $4.64.
Analyzing derivatives data
Derivatives traders are opening and maintaining DOT positions, according to Coinglass. Trading volume surged more than 60%, and open interest rose about 2% to $223 million.
The long-short ratio is at a neutral level of 0.97, suggesting that the market is not heavily biased towards long or short traders.
On Binance, however, long traders appear to significantly outnumber short traders, with the long/short ratio at 4.37.
Polkadot Network Activity
One of the factors holding Polkadot back from breaking through resistance is the decline in network activity.
According to Token Terminal, the number of daily active addresses has dropped significantly, indicating a decline in usage.
Since the beginning of the month, daily active addresses have dropped from 5,200 to about 3,600. On the other hand, the number of daily transactions has remained relatively stable without any major changes.
Declining network usage tends to reduce demand for tokens. It also indicates a decline in confidence in Polkadot, further dampening sentiment.
Data from Market Prophit shows that sentiment around Polkadot has been predominantly negative over the past month. If this sentiment does not change, DOT may continue to face lackluster performance.
Polkadot (DOT) Price Analysis
Polkadot (DOT) recovery is gaining momentum as it has broken above its 20-day and 50-day moving averages to start the new week strongly. On Wednesday, DOT fell below the key $4 level as sellers dragged it to a low of $3.95. However, it rebounded from this level and moved back above $4 to close at $4.02. On Thursday, sellers dragged DOT below $4 again, but it rebounded strongly, rising 1.49% to close at $4.08. On Friday, DOT continued its upward trend, rising 2.21% to $4.17.
The weekend price action was mixed, but DOT still managed to rebound strongly and is now breaking through the strong resistance of $4.20. In the current trading day, DOT is up 6.15%, and the price has risen to $4.41. Buyers have pushed DOT to successfully break through the 20-day and 50-day SMA levels, and we may see it surge to $4.50. A breakout above $4.50 could take DOT to $5. However, if sellers regain control, DOT could fall back to $4.
