Here’s How Low DOT’s Price Might Crash if $6 Support Fails (Polkadot Price Analysis)

The recent rejection of Polkadot's 200-day moving average triggered a significant pullback, bringing the cryptocurrency's price closer to the lower end of its sideways trading range, set at $6.

However, the price action near this juncture holds the utmost importance in predicting the cryptocurrency's next move.

Technical Analysis

by Cheyenne

Daily chart

A thorough examination of Polkadot's daily chart reveals a prolonged sideways consolidation phase, with crucial resistance at $7.5, coinciding with the important 200-day moving average and crucial support at $6. Recently, the price faced rejection near the upper border of this range, resulting in a noticeable decline.

With the cryptocurrency now approaching the lower end of the range, sellers are preparing for a potential bearish breakout.

If they succeed in pushing the price below this critical level, a sustainable downtrend may emerge. Conversely, an upward bounce towards the upper limit of the range becomes possible as demand flows. However, price action around this vital support zone will determine the cryptocurrency's near-term trajectory.

Four-hour chart

Zooming in on the 4-hour time frame, after rejection from the significant resistance around the $7.4 mark, which includes the 0.5 Fibonacci level and the upper limit of the rising wedge, the price saw a sharp decline, near the lower limit of the wedge.

However, Polkadot is now teetering on the brink of a breakout below this crucial demand zone, indicating potential new downside momentum.

However, significant demand near this key level leaves room for an upward bounce, which could lead to a bounce towards the pattern's upper trend line. However, if the price eventually breaks the bottom of the pattern, sellers will target the bottom of the range at $6.

Sentiment analysis

by Cheyenne

Given the recent uncertainty surrounding Polkadot's price path, it is important for participants to delve into futures market sentiment to gauge the future potential of the cryptocurrency. The accompanying chart shows key metrics such as open interest and funding rates in conjunction with Polkadot's daily price movements.

When analyzing the chart, it becomes clear that coinciding with a period of sideways consolidation, open interest (OI) rates and funding rates declined significantly, fluctuating near their lowest points.

The significant decline in both metrics indicates that the futures market may be ripe for aggressive futures positions, which could lead to a significant shift in the market.

Therefore, if the ongoing consolidation phase culminates in increased demand and an influx of long positions, this could signal the beginning of a noteworthy uptrend, with focus on higher price targets. On the other hand, if the current flat price action leads to a re-establishment of short positions, a cascade would be the most likely outcome.