HIGHLY ANTICIPATED PARACHAINS AUCTIONS ALMOST HERE!
Exactly 101 days after hitting the lowest price level since January 2021 Polkadot (DOT/USDT) finds itself in a position of the 8th largest blockchain with market capitalization of $46.05B (+61% compared to days ago) according to coingecko.com. Without any doubts, the next month will be the most interesting & potentially breakthrough one in the history of the token, with the highly anticipated first ever Parachain Auctions finally getting rolled out starting from the 11th of November. Needless to say that investors have been preparing for this accordingly since way before the popular announcement was officially made on the 13th earlier this month, when DOT's value was at the $34 mark. The coin is trading at $44 today which represents an appreciation of more than $10 per unit or hefty 31% compared to the moment of the proclamation and the main question that I shall try & contemplate in this article is as follows: is Polkadot still a good crypto to invest in for the short-term with a view to take profits before the Parachain Auctions commence, and additionally: what kind of price movement can we possibly expect once they get underway?
So called ''sell the news'' situation always springs to mind whenever we deal with such major events as this one obviously is, although that certainly not always is a case so in my opinion we really need to break this down to avoid the risk of mistiming our entries/exits or even missing out on a potential 'moonshot'. Apart from technical and fundamental analysis I luckily have got another piece of a puzzle to help us, owing to the fact, that Polkadot's older sibling – Kusama already pioneered the path with a few rounds of its own Parachain Auctions behind the belt. That could be useful as long as we bear in mind that DOT is the master project while KSM (KSM/USDT) is pretty much a test blockchain albeit a fully functional one and naturally much smaller as well ($46B vs $3.3B) - a canary blockchain in the words of the creators of both.
DOT TO FOLLOW KUSAMA'S PATH AND DROP IN VALUE SOON?
When Kusama Parachain Auctions were first announced on the 8th June by Gavin Wood, KSM saw an immediate pump that day. The price increased from an intraday low of $342 by a whooping 58% trading as high as $537 only two days later. During the same two-day period Bitcoin (BTC/USDT) also enjoyed a solid 'little' run of its own but 'only' grew by 24.5%. From its high on the 10th of June Kusama literally fell off a very steep cliff shockingly losing nearly 71% of its dollar value (and 66% against BTC) over the next 16 days and later hitting a local bottom at the $142 mark on the 20th of July, where the price recovery started along with the rest of the crypto market.
Polkadot obviously had no breakthrough events whatsoever in June yet over the same 16-day period the token only lost 33% and this already in my mind is hard evidence of a ''buy the rumour, sell the news'' kind of a situation taking place. Otherwise Kusama wouldn't have had a reason to perform so much poorer than its more prominent sibling, since it was KSM that was set to have the parachain auctions kicking off in the following 7 days and they were scheduled to run for pretty much months with modest intervals in between. It's as clear as black & white that investors knew about the auctions long before they were announced and that it was their buying pressure that managed to push the price up by 500% from the New Year's Day. I'm also absolutely convinced that it was predominantly the retail that caused the 58% pump which only lasted two days and eventually led to a rapid decrease. What's a little sursprising was that the sell-off already started 7 days before Auctions even commenced, but let's not forget that all that doesn't have to point to a guaranteed repeat with Polkadot (DOT/USDT) which boasts a market cap that's larger roughly by a factor of 15. ''Selling the news' without dropping a price that much is obviously much easier to do when dealing with a TOP 10 cryptocurrency (ok, I know DOT is much more than just a currency, relax) and different strategies could be used towards that end.
Polkadot auctions start on the 11th of November so we will definitely find out very soon if the same scenario is in store once again. As for the TA, I won't be focusing a whole lot of my attention on that in the coming weeks to be honest since I strongly believe that the price action will be mainly affected by the auctions themselves as well as the speculators looking to take profits when the hype is fully on. Still, a couple of things that I see in the charts that should be briefly mentioned - in my opinion:
- Polkadot's price respecting a steep ascending trendline since the 29th of September.
- after breaking above the $44-45 mark the last remaining area of expected resistance should be around the round & psychological $50 price. What comes after is anybody's guess I suppose.
- if the potential selling pressure associated with ''selling the news'' materializes I might be looking at $34 as my comfortable accumulation zone in order to take even greater advantage of the upcoming Parachain Auctions. Truthfully, been waiting for this!
That's about it for now, my next article on Polkadot should emerge on cryptodaily.co.uk shortly before the Big Date, Happy Trading/Investing!
Disclaimer: This trading analysis is provided by a third party, and for informational purposes only. It does not reflect the views of Crypto Daily, nor is it intended to be used as legal, tax, investment, or financial advice.