Polkadot has recently reached a crucial support region near its previous major swing low of $6 after facing a significant rejection.
The price is now experiencing slight fluctuations, which may lead to increased market volatility.
Technical Analysis
The Daily Chart
The daily chart reveals that after a notable 17% drop, Polkadot’s price has settled near the $6 support zone, aligning with its prior major swing low. This area is filled with demand, and the bearish momentum has diminished upon reaching this threshold. The cryptocurrency has entered a period of slight fluctuations with minimal volatility, indicating a struggle between buyers and sellers at this critical level.
This action suggests that the existing demand might dominate the supply in the short term. Hence, a temporary period of sideways price movement appears imminent before either side gains control and initiates the next significant move.
The 4-Hour Chart
On the 4-hour chart, Polkadot’s price experienced substantial selling pressure after breaching the lower boundary of a multi-month ascending wedge pattern, accelerating the bearish momentum. Upon reaching the crucial $6 support region, heightened buying pressure emerged, leading to slight sideways movements.
Nevertheless, the price is currently forming a symmetrical triangle pattern, indicating a lack of clear momentum. As the price approaches the narrowest range of the pattern, a breakout in either direction will likely determine the next short-term move. A breakout above this pattern could potentially lead to a bullish retracement toward the $6.7 mark.
Sentiment Analysis
With Polkadot’s price failing to establish a new daily high, traders are seeking explanations. While the price reflects a struggle between buyers and sellers, insights from the futures market sentiment could offer valuable perspectives.
The accompanying chart illustrates Polkadot’s open interest, a critical metric for assessing futures market sentiment. Typically, higher open interest values signal bullish sentiment, while excessively high values can trigger heightened volatility and potential liquidation cascades.
Recently, the open interest metric peaked, indicating an overheated futures market. However, following the recent plunge, a long-liquidation event ensued, resulting in a significant decline. Despite Polkadot’s downtrend, it’s notable that the open interest metric has followed a similar trajectory, experiencing a substantial decrease. This alignment suggests a cooling off of activity within the futures market.
Consequently, the market appears primed for the resurgence of either long or short positions, potentially triggering a fresh and decisive market movement in either direction.
source news https://cryptopotato.com