The winds of change may be blowing on Polkadot (DOT), a popular blockchain network for connecting different blockchains. After a tough two months that saw prices drop by nearly 50% from their peak in April, DOT is showing signs of a possible recovery.
This positive outlook stems from a combination of three main factors: whispers about a DOT-focused ETF on Coinbase, a bullish technical chart pattern, and healthy levels of liquidity in the market.
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The ETF hype is getting investors excited.
Earlier this week, news broke that cryptocurrency exchange 0xNoble revealed on social media that Coinbase may be secretly harboring plans to create a DOT exchange-traded fund. The crypto exchange is rumored to be in the early stages of applying for the fund, and is expected to clear its first approval hurdle on July 15.
This news comes on the heels of Coinbase’s significant move on June 28, when it filed for DOT futures, a futures ETF, and a spot ETF.
Coinbase files confidential application a point ETF 🔥
The first phase 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 exchange-traded fund has generated a lot of excitement within the Polkadot community. ETFs, which trade like stocks on traditional exchanges, could introduce a new wave of investors to the crypto space.
These broader exposures often translate into increased buying pressure and a potential rally in the underlying asset’s price. Notably, the ETF announcement has already sparked increased activity on Coinbase derivatives, a testament to pent-up investor interest.
Polkadot: Technical Analysis Indicates Price Rise
A recent technical analysis by ZAYK Charts, a respected cryptocurrency research firm, has added fuel to the fire of DOT’s bullish rally. Their analysis of DOT’s daily chart revealed a compelling pattern known as a falling wedge.
This pattern is characterized by converging trend lines that slope downward, encapsulating lower highs and lower lows. While traditionally viewed as a bearish pattern, a falling wedge can also signal a potential bullish reversal.
According to ZAYK Charts, the falling wedge indicates that although sellers have been in control recently, their influence is waning. This is also evident from Polkadot’s oscillation within this pattern since February. The lower trendline has consistently provided support, while the upper trendline has acted as resistance.
ZAYK expects a breakout of this wedge, which typically leads to a significant upward price movement. The breakout target is around $9.60, which represents a potential gain of over 50% from the current price level.
a point Still moving inside the falling wedge, in a one-dimensional time frame✅
Expected to erupt📈#a point #DOTOUSDT #dotted #cryptocurrencies pic.twitter.com/19eQ0cPBwR
— ZAYK Charts (@ZAYKCharts) July 7, 2024
The analyst highlights this target area as a green box on the chart. The timing of this breakout is crucial – as DOT continues to trade within the narrowing wedge, pressure is building, making a breakout more likely in the near future.
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Ample liquidity could amplify potential upside.
Adding another layer of excitement to the DOT bull story is the presence of significant liquidity. A heatmap analysis by NewsBTC revealed concentrated liquidity areas for DOT between $6.45 and $6.96. Liquidity refers to the ease with which an asset can be bought or sold.
High liquidity leads to smoother price movements, as large buy or sell orders are less likely to cause large price fluctuations.
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 declines.
If a breakout occurs from the falling wedge, this liquidity could help push DOT price towards the $9.60 target area identified by ZAYK charts.
Featured image by Shutterstock, chart by TradingView