Polkadot price has rebounded this week as cryptocurrencies recovered from last week’s sharp decline. DOT jumped to the psychologically important $6 mark, above last Friday’s low of $4.92.
Weak network performance
Polkadot is a leading blockchain network created by Gavin Wood, one of the co-founders of Ethereum, the world’s second-largest cryptocurrency.
Its goal is to provide a platform on which developers can create parachains, which are independent chains that run in parallel with the Polkadot blockchain.
Parachains have the same security and interoperability as Polkdaot and can be used by developers to build their decentralized applications (dApps).
Polkadot has attracted many developers over the past few years who love it for its high speed, low cost, and interoperability. Some of the most notable parachains in the ecosystem are Acala, Centrifuge, HydraDX, and StellaSwap.
However, a closer look at most of these parachains shows that they have not gained popularity among users. For example, Acala has a total value locked (TVL) of only $6.1 million, which is a tiny amount. It has been surpassed by other new networks such as Sui, Sei, and Arbitrum.
Moonbeam has a TVL of over $37 million, while Moonriver has a TVL of $6 million. Centrifuge is the only Polkadot network that is doing well, as it has accumulated over $292 million in assets.
Polkadot has also been left behind in other fast-growing industries that have propelled blockchains like Solana and Ethereum higher. For example, its ecosystem lacks major decentralized exchanges (DEXs) and meme coins.
Polkadot Wallet Growth
All of these factors have contributed to the weakening performance of the network. Data shows that the number of active addresses on Polkadot has dropped to just 5.6k, down from a year-long high of over 20k. As I’ve written before, a network like Tron has over 2 million active addresses.
Another metric shows that the number of transfers on the Polkadot Relay Chain has dropped from over 30,000 in January to under 7,000, a sign that activity on the network is fading.
The monthly number of transfers on the Polkadot Relay Chain network fell to 221.4 thousand in June from a year-to-date high of 500 thousand in March.
Polkadot Monthly Transfers
Therefore, there are concerns about Polkadot’s valuation, given that the DOT token has a market cap of over $14 billion, making it the 14th-largest cryptocurrency in the world. It is larger than coins such as Chainlink, Polygon, Uniswap, and Kaspa.
One likely reason for this valuation is that investors like Polkadot’s staking rewards. Polkadot’s staking market cap is over $5.18 billion, and its yield is around 11.4%. Its yield is significantly higher than other cryptocurrencies such as Ethereum, Solana, Avalanche, and Aptos.
Additionally, Polkadot has maintained this valuation due to its correlation with Bitcoin and other coins like Ethereum. In most cases, the price of DOT rises when Bitcoin rises, and vice versa. For example, it jumped to a high of $11.90 in March, when Bitcoin soared to an all-time high.
Polkadot Price Prediction
DOT chart by TradingView
The daily chart shows that the DOT price peaked at $11.90 in March and has now dropped to $5.96. This price is important because this was its lowest swing in January of this year.
Polkadot has fallen below the 50-day and 100-day exponential moving averages (EMA), which means the bears are still in control. It has fallen below the 61.8% Fibonacci retracement level and the descending trendline.
So there is a chance that this bounce is part of a dead cat bounce, which is a temporary bounce where the coin is falling. So there is a chance that it will fall and retest this month’s low of $4.94.
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