Three reasons Polkadot is on the way to a new all-time high even after rallying 256%

Polkadot’s recent 256% rally (DOT) over the past 56 days has been nothing short of spectacular. Although the price is 23% below its all-...


Polkadot’s recent 256% rally (DOT) over the past 56 days has been nothing short of spectacular. Although the price is 23% below its all-time high of $ 49.80 four months ago, altcoin’s $ 39 billion market cap outperformed Ether (ETH) by 66% in the last thirty days.

Polkadot / USDT. Source: Bybt.com

Polkadot is a blockchain network designed to support various interconnected and application-specific parallel chains called parachaines. This scalability-focused project splits transactions into multiple fragments and processes them in parallel, in the same way that ETH 2.0 aims to achieve.

Polkadot refers to the entire ecosystem of parachains that plug into a single basic platform known as the Relay Chain. This base layer ensures the security of the network and manages the logic of consensus, purpose and vote.

To support parachain launches, users vote for projects by locking DOT tokens. Currently, only Kusama – Polkadot’s “canary” network and an early, unrefined version of Polkadot – holds its own auctions for these slots. Polkadot is expected to launch the same process over the next few months.

Polkadot integration with DeFi increases

The Polkadot ecosystem has continued to grow. On September 8, SubQuery, a decentralized data aggregator, raised $ 9 million to build Polkadot’s first data aggregation layer.

As an example of this integration, the Moonbeam parachaine has tokens built on the Polkadot development tool (Substrate). These tokens can be sent transparently to Ethereum wallets and smart contract addresses. On September 9, Moonbeam announced a partnership with Pool, a decentralized liquid staking derivatives protocol currently deployed on Ethereum and Terra.

The latest update came from dTrade, a decentralized exchange (DEX). After successfully raising $ 6.4 million in a seed funding round in May 2021, DEX raised an additional $ 22.8 million market making fund designed to provide “deep liquidity” and backed by some of the major crypto market makers.

Related:Layer two governance proposals and launches give altcoins a boost

Derivatives data shows potential for new all-time high

Technical analysts are quick to make price projections, but investors should analyze Polkadot’s derivatives data. For example, a non-existent futures premium means that investors are uncomfortable creating bullish positions using leverage.

Futures contracts on Polkadot pool open interest. Source: Bybt.com

DOT’s total open term interest rose from $ 360 million to $ 685 million in 30 days. This is a positive indicator as it reflects the willingness of leveraged traders to keep their long positions open despite the rally.

In futures trading, long (long) and short (short) positions are matched at all times, but their leverage varies. Any imbalances are reflected in the funding rate, and derivatives exchanges will charge the party that uses the most leverage to balance their risk.

The constant development of the protocol will be the ultimate driver of the price of DOT

8 hour funding rate for Polkadot perpetual futures contracts. Source: Bybt.com

In the first week of September, a good dose of optimism surfaced as the eight-hour funding rate hit 0.10%, or 2.1% per week. However, the situation was reversed after the prices fell 35% on the morning of September 7th.

This intraday low of $ 22.70 from a week ago may seem irrelevant as the DOT price is above $ 36.00, but traders’ appetite for leveraged long positions is not growing. has not yet recovered.

The most likely scenario is a “half full glass” where investors will regain confidence as the project continues to deliver.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trade move involves risk. You should do your own research before making a decision.