ANOTHER WEEK IN THE RED FOR THE CRYPTOCURRENCY MARKET
The cryptocurrency market is seeing another week of widespread sell-offs as a whole. The global market cap today is $2.27T, a –2.4% change in the last 24 hours, according to coingecko.com. The last month of 2021 hasn’t been good in terms of prices either. This already makes it a second consecutive disappointing month for a majority of investors, with only some, albeit not very numerous, exceptions.
The same can be said about traditional stock markets. For instance, the S&P 500 index has closed the week at $4620, which is practically an identical level to the one that was seen on the 1st of November. Once again, a possible pullback is commonly being considered by the investors, as evidenced by the Fear & Greed Index, which is signalling Fear (at 29/100) at the present moment, according to CNN Money indicator.
The December sell-offs in the cryptoverse have kept the corresponding F & G Index even lower (24/100 as of today, Saturday the 18th of Dec), and for an even longer period of time already. Including the latest reading, we have experienced two full weeks below 30/100, which normally should point to a good time for … shopping! Let’s have a look at some crypto assets that can be purchased at a sizeable discount.
As is usually the case, some tokens have lost more value relative to USD than others. One of the biggest ‘losers’ among all the large-cap coins have been: Polkadot (DOT/USDT), Cardano (ADA/USDT), Shiba Inu (SHIB/USD), Dogecoin (DOGE/USDT) & Ripple (XRP/USDT): -55.5%, -60.8%, 64.6%, -77.7% & 79.2% respectively.
In this write-up, we have decided to focus on the first one today, as we think that DOT might still represent a potentially interesting idea for a late investment, in spite of the ongoing market-wide correction.
DOT’S PRICE DOWN 55.5% FROM ITS PRE-PARACHAINS ALL-TIME HIGH
Over the recent days, Polkadot has lost its position of the 9thlargest cryptocurrency by market capitalization after getting overtaken by the hottest coin of the week - Avalanche (AVAX/DOT), whose incredible rally to the upside in the last week puts it in front of all other top 100 tokens in terms of growth percentage (+30% compared to one week ago).
DOT, on the other hand, has only been on a Downtrend ever since it hit its ATH on the 4th of November. The most likely reason for this decline is a combination of two main factors: the ‘sell the news’ effect after the Parachain Auctions kicked-off and obviously the market-wide correction.
Turning to the chart, we should instantly notice that Polkadot has just recently lost a few important levels. To begin with, it has broken down below the $26 mark, which was acting as tough resistance back in May, June and August, after which it was flipped into an extremely reliable support area that played a pivotal role for the price action, especially in September, but also over the recent two weeks.
Another crucial loss from the Technical Analysis perspective was breaking below the 200-day Moving Average. Polkadot needs to recover this before we can consider putting any money into the asset, otherwise the 200-day MA will likely make up a tough hurdle to jump over, especially considering the near-presence of another well-established resistance at $30.
We normally ought to avoid entering a market until an asset has shown at least 2-3 confirmations of strength, and breaking back above the $26 point, the 200-day MA constitutes, in our opinion, an absolute minimum for us to start talking about buying into the token with enough confidence.
Ideally, we shall wait for Polkadot to get back above $30 and successfully test this level as support. Ultimately though, it’s the King of Crypto (BTC/USDT) that dictates the trajectory of virtually all crypto. Therefore, we should primarily wait for the oldest token to start showing some signs of its short-term Downtrend reversal before getting involved in any altcoins, because if Bitcoin experiences another pullback, then practically all the alts will be certain to bleed even harder.
PARACHAIN AUCTIONS TO KEEP ADDING MORE BUYING PRESSURE
The 5th Parachain Auction has just finished, and there is another 95 of these to come. So far, 99.1 million DOT have been frozen by the auction winners until October 2023 at least. This amount already constitutes 8.7% of the total supply of Polkadot, which will be out of circulation for close to 2 years at a minimum. And potentially for much longer than that, if all goes well.
It’s impossible to predict the total amount of the asset that will end up being locked up through the parachains, but what we do know already, is that the demand for DOT has been extraordinary, to say the least. The possibility of a potential supply shock, which would unquestionably make up a great catalyst for the price, is definitely much higher than it is for other coins.
That’s fundamentally the main reason why we have selected Polkadot, and not any other crypto that has declined from its ATH by a lot, as our main pick for a potential investment. A crypto winter could be around the corner, so we would rather consider an asset that will continue to see buying pressure.
In addition to that, DOT has been the second most-staked coin as far as the large-caps are concerned. Currently, as much as 63% of the total DOT supply is locked-up with only Solana ahead in this aspect with 76.9% of its tokens out of circulation.
Having said that, if the worst-case scenario was to play out in the coming months for the cryptocurrency market, then obviously Bitcoin and Ether will remain the two safest digital assets to hold. By the way, another Bitcoin update will appear on cryptodaily.co.uk next. Stay Safe In The Markets, we might be in for even more volatility, best to think twice before investing in any altcoins at the present time...
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice