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Can Bullish Momentum Overcome Slump?

Published

2 months ago

May 18, 2024

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In this comprehensive analysis, we delve into Polkadot’s recent price surge, driven by both technical and on-chain indicators

Penetrating the daily Ichimoku cloud could indicate continued price appreciation towards $8.

Polkadot Technical Outlook: Understanding the Surge

Polkadot (DOT) has broken above the 4-hour Ichimoku cloud. Returning to the cloud in the 4-hour timeframe could signal a trend reversal. On the daily timeframe, the price of Polkadot is approaching the lower boundary of the Ichimoku cloud.

DOT/USDT Price Action. Source: TradingView

Polkadot On-Chain Data: A Deep Dive

The chart illustrates that the number of new addresses on the Polkadot Relay Chain has experienced two consecutive monthly declines. This trend is a bearish indicator. Polkadot is currently struggling to attract new entrants to the network.

Number of New Addresses on the Polkadot Relay Chain (Monthly). Source: IntoTheBlock

A sustained reduction in the number of new addresses can impact the overall health and expansion of the Polkadot ecosystem.

Read More: What Is Polkadot (DOT)?

Number of New Addresses on the Polkadot Relay Chain (7DMA). Source: IntoTheBlock

Active addresses are a key indicator of user engagement and network health. In the context of Polkadot, this decline could mean several things:

First, it might indicate that existing users are less active, possibly due to a lack of compelling projects, updates, or incentives to maintain engagement.
Second, it could reflect broader market trends affecting the entire cryptocurrency space, where users are becoming more cautious or shifting their focus to other platforms.
Third, a decrease in active addresses on a blockchain focused on interoperability could imply challenges in maintaining its unique value proposition compared to other Layer 0 or Layer 1 solutions.

The chart below illustrates the 7-day moving average (7DMA) of daily transfers on the Polkadot Relay Chain. This highlights a significant downward trend. Following a peak in January 2024, where daily transfers nearly reached 40,000, the number of transfers has steadily declined.

This decline in transfer volume can have several implications for Polkadot’s price. Reduced transfer activity often correlates with lower overall network usage and decreased demand for the native DOT token (in the mid-term).

Strategic Recommendations and Future Price Implications

Neutral Outlook

Polkadot (DOT) has demonstrated an upward trend, breaking the 4-hour Ichimoku cloud to the upside. This technical pattern suggests potential bullish momentum. However, traders should be cautious as a pullback to the cloud in the 4-hour timeframe could signal a trend reversal.
The recent upward trend in Polkadot’s price is heavily influenced by the broader market movements, notably the increase in Bitcoin’s price. Additionally, speculative activities around Polkadot’s derivatives contracts on centralized exchanges have contributed to the price surge.
While the technical indicators point towards bullish momentum, the on-chain data highlights potential risks. The decrease in new and active addresses and reduced transfer volumes signal a decline in user engagement and network activity.

Entry Points and Risk Management

Traders should consider entering long positions on Polkadot if it successfully penetrates the 4H Ichimoku cloud to the downside, targeting a move toward $8. However, monitoring Bitcoin’s price movements is crucial, as a test of the $61K level by Bitcoin could lead to a sharp correction in DOT’s price. Although the probability of such a correction has decreased, it remains a risk, particularly in the event of macroeconomic or geopolitical factors.
In the mid to long term, traders should employ risk management strategies, including setting stop-loss orders below key support levels (6 – $6.4) to mitigate potential losses.

Disclaimer

In line with the Trust Project guidelines, this price analysis article is for informational purposes only and should not be considered financial or investment advice. BeInCrypto is committed to accurate, unbiased reporting, but market conditions are subject to change without notice. Always conduct your own research and consult with a professional before making any financial decisions. Please note that our Terms and Conditions, Privacy Policy, and Disclaimers have been updated.

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Related Topics:Bullish Momentum Overcome Slump

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Market

Exploring Upward Momentum and Bullish Prospects

Published

14 mins ago

July 3, 2024

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Aayush Jindal, a luminary in the world of financial markets, whose expertise spans over 15 illustrious years in the realms of Forex and cryptocurrency trading. Renowned for his unparalleled proficiency in providing technical analysis, Aayush is a trusted advisor and senior market expert to investors worldwide, guiding them through the intricate landscapes of modern finance with his keen insights and astute chart analysis.

From a young age, Aayush exhibited a natural aptitude for deciphering complex systems and unraveling patterns. Fueled by an insatiable curiosity for understanding market dynamics, he embarked on a journey that would lead him to become one of the foremost authorities in the fields of Forex and crypto trading. With a meticulous eye for detail and an unwavering commitment to excellence, Aayush honed his craft over the years, mastering the art of technical analysis and chart interpretation.
As a software engineer, Aayush harnesses the power of technology to optimize trading strategies and develop innovative solutions for navigating the volatile waters of financial markets. His background in software engineering has equipped him with a unique skill set, enabling him to leverage cutting-edge tools and algorithms to gain a competitive edge in an ever-evolving landscape.

In addition to his roles in finance and technology, Aayush serves as the director of a prestigious IT company, where he spearheads initiatives aimed at driving digital innovation and transformation. Under his visionary leadership, the company has flourished, cementing its position as a leader in the tech industry and paving the way for groundbreaking advancements in software development and IT solutions.

Despite his demanding professional commitments, Aayush is a firm believer in the importance of work-life balance. An avid traveler and adventurer, he finds solace in exploring new destinations, immersing himself in different cultures, and forging lasting memories along the way. Whether he’s trekking through the Himalayas, diving in the azure waters of the Maldives, or experiencing the vibrant energy of bustling metropolises, Aayush embraces every opportunity to broaden his horizons and create unforgettable experiences.

Aayush’s journey to success is marked by a relentless pursuit of excellence and a steadfast commitment to continuous learning and growth. His academic achievements are a testament to his dedication and passion for excellence, having completed his software engineering with honors and excelling in every department.

At his core, Aayush is driven by a profound passion for analyzing markets and uncovering profitable opportunities amidst volatility. Whether he’s poring over price charts, identifying key support and resistance levels, or providing insightful analysis to his clients and followers, Aayush’s unwavering dedication to his craft sets him apart as a true industry leader and a beacon of inspiration to aspiring traders around the globe.

In a world where uncertainty reigns supreme, Aayush Jindal stands as a guiding light, illuminating the path to financial success with his unparalleled expertise, unwavering integrity, and boundless enthusiasm for the markets.

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Market

Should Investors See This as a Buying Chance?

Published

1 hour ago

July 3, 2024

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Market

Ethereum Reverses Course: Can ETH Bulls Save The Day?

Published

2 hours ago

July 3, 2024

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Ethereum price failed to climb above the $3,520 zone and corrected gains. ETH is now showing bearish signs below the $3,400 support zone.

Ethereum started a downside correction after it failed to surpass the $3,520 zone.
The price is trading below $3,400 and the 100-hourly Simple Moving Average.
There is a key bearish trend line forming with resistance near $3,410 on the hourly chart of ETH/USD (data feed via Kraken).
The pair is now at risk of more downsides below the $3,350 support zone.

Ethereum Price Dips Again

Ethereum price failed to continue higher above the $3,520 and $3,550 resistance levels. ETH formed a top near $3,520 and started a fresh decline like Bitcoin. There was a move below the $3,450 and $3,420 support levels.

The bears pushed the price below the 50% Fib retracement level of the upward wave from the $3,351 swing low to the $3,516 high. It seems like the price trimmed most gains and might continue to move down below the $3,350 support zone.

Ethereum is trading below $3,400 and the 100-hourly Simple Moving Average. It is also below the 76.4% Fib retracement level of the upward wave from the $3,351 swing low to the $3,516 high.

If there is a recovery wave, the price might face resistance near the $3,400 level. There is also a key bearish trend line forming with resistance near $3,410 on the hourly chart of ETH/USD. The first major resistance is near the $3,435 level.

The next major hurdle is near the $3,465 level. A close above the $3,465 level might send Ether toward the $3,520 resistance. The next key resistance is near $3,550. An upside break above the $3,550 resistance might send the price higher. Any more gains could send Ether toward the $3,650 resistance zone.

More Losses In ETH?

If Ethereum fails to clear the $3,410 resistance, it could continue to move down. Initial support on the downside is near $3,365. The first major support sits near the $3,350 zone.

A clear move below the $3,350 support might push the price toward $3,250. Any more losses might send the price toward the $3,120 level in the near term.

Technical Indicators

Hourly MACD – The MACD for ETH/USD is gaining momentum in the bearish zone.

Hourly RSI – The RSI for ETH/USD is now below the 50 zone.

Major Support Level – $3,350

Major Resistance Level – $3,435

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