DOT/USD on edge amid contagion risks
Polkadot price has been in a strong bearish trend in the past few days as the crypto sell-off gains steam. DOT/USD was trading at $5.631, which was slightly below this week’s high of $6. This price is also about 25% below the highest point this month.
Polkadot ecosystem challenges
Polkadot is one of the biggest blockchain networks in the world. DOT, its coin, has a total market cap of over $6 billion, making it a top-ten cryptocurrency. At its peak, it was valued at over $30 billion.
Polkadot was created by Gavin Wood, a co-founder of Ethereum, one of the biggest blockchains in the world. The two networks have a similar goal of making it possible for people to build decentralized platforms.
Polkadot’s goal is to unite networks of heterogeneous blockchain shards called parachains. A parachain is a sovereign blockchain that can have its own token. Some of the most popular parachains are Kusama, Acala, and Litentry.
The heart of Polkadot’s ecosystem is a product known as a relay chain. It is an important technology that is responsible for the network’s security, consensus and cross-chain interoperability. Bridges are also important in Polkadot’s ecosystem. They enable Polkadot shards to connect to and communicate with external networks like Ethereum and Solana.
Polkadot price has been in a strong bearish trend in the past few months. The most recent reason for the crash is the ongoing collapse of FTX, the second-biggest exchange in the world after Binance. The collapse of the company has led to fears of contagion in the industry. As a result, the crypto fear and greed index has dropped to the extreme fear level.
At the same time, there are concerns about Polkadot’s ecosystem. In the past few months, the total value locked in key parachains like MoonRiver, MoonBeam, and Acala has been falling.
Polkadot price forecast
DOT/USD chart by TradingView
Is it safe to buy Polkadot? The Renko chart above shows that the Polkadot price has been in a strong bearish trend in the past few months. It managed to drop below the important support level at $6.27, which was the lowest level on July 12. This price was also the neckline of the head and shoulders pattern.
DOT/USD price has moved below all moving averages while the Awesome Oscillator has moved below the neutral level. Therefore, the coin will likely continue falling as sellers target the next key support level at $5.0.
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