The winds of change may be blowing for Polkadot (DOT), a popular blockchain network for connecting different blockchains. After a rough few months marked by a price drop of nearly 50% from its April peak, DOT is showing signs of a potential resurgence.
This positive outlook stems from a confluence of three main factors: rumors of a DOT-focused exchange-traded fund (ETF) on Coinbase, a bullish technical chart pattern, and healthy levels of liquidity in the market.
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ETF Buzz sparks investor interest
News emerged earlier this week that crypto researcher 0xNoble revealed on a social media platform that Coinbase may be harboring secret plans for a DOT ETF. The rumor suggests that the cryptocurrency exchange is in the early stages of applying for the ETF, with the first approval hurdle expected to be July 15.
This news comes on the heels of Coinbase’s significant move on June 28, where they filed for DOT futures contracts, a futures ETF, and a spot ETF.
Coinbase is secretly soliciting $DOT ETFs 🔥
The first stage of approval is already scheduled for July 15th!
Polkadot ETF will be incredibly bullish for the entire ecosystem👇🧵 pic.twitter.com/OF8CrJxp2m
– 0xNobler (@CryptoNobler) July 4, 2024
The prospect of a DOT ETF has generated excitement in the Polkadot community. Exchange-traded funds, which trade like stocks on traditional exchanges, could introduce a new wave of investors to the cryptocurrency space.
This broader exposure often translates into increased buying pressure and potentially higher prices for the underlying asset. Notably, the ETF announcement has already triggered a surge in Coinbase Derivatives activity, a testament to pent-up investor interest.
Polkadot: Technical Analysis Tips for Price Breakout
Adding fuel to the DOT rally is a recent technical analysis from ZAYK Charts, a respected cryptocurrency research firm. The analysis of DOT’s one-day chart revealed an attractive pattern known as a falling wedge.
This pattern is characterized by converging trendlines that slope downward, encapsulating lower highs and lower lows. While traditionally seen as a bearish pattern, falling wedges can also indicate a potential bullish reversal.
According to ZAYK charts, the dip suggests that while sellers have been in control recently, their influence is waning. This is further evidenced by Polkadot’s oscillation within this pattern since February. The lower trendline has consistently provided support, while the upper trendline has acted as resistance.
ZAYK anticipates a breakout from this wedge, which typically leads to significant upward price movement. His breakout target sits around $9.60, representing a potential gain of over 50% from the current price level.
$DOT Still moving within the descending wedge, on the 1D timeframe ✅
Waiting for the breakup📈#POINT #DOTUSDT #Polka dot #Crypto pic.twitter.com/19eQ0cPBwR
– ZAYK Charts (@ZAYKCharts) July 7, 2024
The analyst highlights this target zone as a green box on the chart. The timing of this breakout is crucial – as DOT continues to trade within the narrowing wedge, pressure builds, making a breakout more likely in the near future.
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Ample liquidity could amplify potential upside
Adding another layer of intrigue to the DOT rally narrative is the presence of significant liquidity. A heatmap analysis by NewsBTC revealed zones of concentrated liquidity for DOT between $6.45 and $6.96. Liquidity refers to the ease with which an asset can be bought or sold.
High liquidity translates into smoother price movements, as large buy or sell orders are less likely to cause significant price swings.
The presence of high liquidity between $6.45 and $6.96 creates a more favorable environment for a potential breakout. This abundance of buy and sell orders can act as a buffer, absorbing selling pressure and preventing sharp price drops.
If a breakout from the descending wedge occurs, this liquidity could help push DOT price towards the $9.60 target zone identified by the ZAYK charts.
Featured image from Shutterstock, chart from TradingView