Polkadot (DOT) is currently attracting the attention of investors and analysts alike. Despite a notable drop in network activity and a drop in value following ETF approval, there are signs that Polkadot could still play a significant role in the next bull market.
Polkadot’s network activity and market reaction
The decline in user activity is evident when looking at the number of daily transactions on DOT. Using a seven-day moving average for more detailed analysis shows that the downtrend has been consistent since the beginning of the year. On January 27, the network recorded just 12,000 transactions, a stark contrast to the 30,000 transactions on New Year’s Day. A 60 percent drop makes it clear that usage of the DOT network has dropped significantly.
A closer look at the on-chain data shows that the decline in daily transactions correlates with a reduction in the number of active addresses on the network. Regardless of whether they are sending or receiving, these addresses are down 56 percent year-to-date. The decline in active addresses is a clear indicator of lower network utilization.
Interestingly, there was a brief spike in demand for the chain towards the end of last year. On December 26, 2023, the number of new addresses interacting with the Polkadot network for the first time reached a two-year high. However, the increase was short-lived. Since then, the daily number of new addresses on the blockchain has fallen by 75 percent.
Resilience amidst market fluctuations
Despite the overall market downturn and challenges in network activity, DOT has shown remarkable resilience in certain areas .
A report from Polkadot Insider, a well-known source of updates about the DOT ecosystem, recently shed light on this performance. According to the report, DOT topped the list of blockchains in terms of incentive growth rate in the last seven days. The placement is significant as it places Polkadot ahead of other prominent blockchains such as Ronin and Mina Protocol and even Avalanche, which recorded the highest negative growth.
RANKING BLOCKCHAINS BY INCENTIVE GROWTH RATE IN 7 DAYS
🤔Which blockchains have the highest incentive growth rate in the past week?
👀Find out in our latest infographic that ranks the top🔟performers based on the growth rate of its incentive
🌟You might be surprised by some of… pic.twitter.com/iUYZ70PoHX
— Polkadot Insider (@PolkadotInsider) January 26, 2024
Furthermore, Polkadot’s growth is not just limited to incentive rates. A closer examination shows that DOTs transaction fees have remained consistently high over the past week. Consistency in transaction fees is an important indicator of steady network usage and financial health, despite the overall market downturn.
Future prospects for Polkadot in the crypto market
While recent trends have shown a mix of challenges and resilience, the potential for DOT in the next bull market remains a key point of discussion.
Over the past week, DOT’s price trend has shown a downward trend with a decline of more than 5 percent, as reported by CoinMarketCap. However, in the last 24 hours, the trend has turned positive as the price of DOT has increased by more than 1 percent and is trading at $6.70. Recent price action coupled with a market cap of over $8.3 billion suggests a possible recovery and growing investor interest.
The rise in DOT’s token price has led to an uptick in social metrics . Data from Santiment showed an increase in DOT’s social volume, a metric that tracks overall discussion and interest in the cryptocurrency across various social media platforms. Additionally, there was an increase in weighted sentiment around the token, indicating an increase in bullish sentiment among the community.
Analysis of DOT’s daily chart shows promising signs, including the possibility of a bullish crossover in the Moving Average Convergence Divergence (MACD). Additionally, indicators such as the Money Flow Index (MFI) and Chaikin Money Flow (CMF) are recording bullish trends, indicating a potential increase in Polkadot price.
A renowned crypto analyst, Michael van de Poppe, also recently shared his insights on the altcoin market, focusing specifically on Polkadot. In his analysis, he noted that the altcoin market, including DOT, is on the cusp of a significant increase. Van de Poppe identified a crucial support level between $5.60 and $6 for DOT and highlighted the importance of this zone in sustaining the token price. If this support level holds, he believes DOT could see a significant upside, potentially reaching a target of $17.
I'm accumulating at these regions to make sure that I'll be positioned for the upcoming upwards run.
$5.60-6.00 needs to hold. pic.twitter.com/yf75bN40ml
— Michaël van de Poppe (@CryptoMichNL) January 26, 2024
However, it is important to note that there are resistance levels that Polkadot must overcome for such a bullish scenario to occur. The $9.30 level, reached back on Boxing Day, represents a significant resistance point. The token’s value had collapsed after reaching this level last December.