Polkadot: Is there more to DOT’s price action that what meets the eye

Polkadot’s native cryptocurrency DOT has so far delivered an overall bullish performance over the course of March. Especially over the last 7 days, during which it surged by more than 10%.

However, zooming back for a look at its Q1 performance reveals that DOT’s price action is now at the tail end of a cup and handle pattern. Going forward, this might give us more insights into its short-term and long-term outlook.

DOT was trading at $22.32, at the time of writing, after encountering significant resistance near the $23-price range. In fact, this is also the same price level the price previously tested as resistance when it started forming the cup and handle pattern.

It registered an initial run-up of 45% between 22 January and 8 February, followed by a 37% sell-off to its 2022 low of $14.05.

Source: TradingView

DOT’s cup and handle formation aligns with its latest resistance level, some of its indicators, as well as on-chain metrics. The pattern concludes with a bearish pullback after the curve in DOT’s price action. The 1-hour chart too highlighted DOT’s heavily overbought conditions at its recent top as per the RSI and the MFI.

Where is DOT’s price heading?

At press time, some minor corrections were ongoing. Thanks to the same, DOT seemed to be restricted within its descending support and resistance, perhaps confirming that it is in the “handle” part of the trend.

This is an essential part of the trend because the cup and handle pattern is often considered bullish.

The inferences of DOT’s ongoing correction were also shared by some on-chain metrics such as the percentage held by whales with more than $5 million worth of DOT.

This metric dropped from 52.84% to 52.66% over the last 24 hours. What this means is that some wallet holding a lot of DOT saw some outflows. Now, while that might not seem like much, it could be the precursor to a more significant decline. That would be in line with the expectations of a correction, as per the latest price patterns.

Source: Santiment

Despite the bearish short-term outlook, however, many believe Polkadot remains one of the most promising projects around. It has been holding parachain auctions which increase the demand and utility of the DOT token. Messari, for instance, recently pointed out that 11% of DOT’s total supply has been bonded as part of the auctions.

Blockchain development and the ability to attract investors are some of the other metrics that highlight whether a blockchain will perform well in the future. Polkadot is among the networks with the highest number of developers, and it also happens to be one of the most attractive projects to venture capitalists.

Source: Messari