DOT Crashes 8% a Week, So Is a Bear Trap Possible? (Polkadot Price Analysis)
polkadot has seen a lack of demand and sales activity has intensified, indicating a downward trend in the market. A sudden break below the critical $6 support zone occurred, triggering a series of lengthy liquidations and potentially leading to a sustained downtrend unless there is a false break.
Technical analysis
By Shayan
Daily Chart
The daily chart reveals that Polkadot faced an aggressive sell-off near the critical $6 support zone and suffered pullbacks to the downside, underlining the lack of sufficient demand.
The price aligned with the lower bound of a multi-month triangle and previous major bearish lows, breaking the key $6 support and signaling a significant decline.
Additionally, the 100-day moving average is on the verge of crossing below the 200-day moving average, signaling a death crossover. This development also shows that a downward trend prevails in the market. If the breakout is confirmed by a successful pullback, a sustained downward trend towards lower price levels is likely to occur.
Source: TradingView
4-Hour Chart
On the 4-hour chart, Polkadot faced a serious rejection near the $6.8 supply zone after a sudden rally, completing a pullback to the broken zone and confirming the initial breakout, indicating dominance by sellers.
Once the critical $6 support zone was reached, the bearish momentum initially faded, leading to slight fluctuations. Near this important threshold, the price forms a descending wedge pattern, indicating the potential for a bullish trend reversal.
However, sellers ultimately dominated, breaking the lower boundary of the pattern and the important $6 support zone. This bearish breakout could be a false breakout indicating a bear trap.
Therefore, price action in the coming days will determine the validity of the breakout. If a pullback occurs and sustains below the $6 level, a continuation of the downtrend will be imminent.
Source: TradingView
Sentiment Analysis
By Shayan
Polkadot’s price is showing a significant downtrend and has fallen below the critical $6 support zone. Analyzing futures market sentiment can provide valuable insight into a cryptocurrency’s potential future path.
The attached chart shows Polkadot’s price along with Open Interest (OI) and Funding Rates metrics. The recent downward trend is reflected by a significant decline in the OI metric, reaching its lowest value. This shows a lack of interest among market participants in taking aggressive long positions and suggests that the futures market has cooled with minimal activity.
Typically this scenario is not positive for price, especially when accompanied by negative or near-zero funding rate values. Low open interest and negative funding rates indicate a downward trend prevailing in the market. The downward trend is likely to continue unless a change in the coming days brings demand back to the market.
Source: Coinglass
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Cryptocurrency charts from TradingView.
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