According to CryptoPotato, Polkadot recently faced a significant downturn due to increased selling activity around the 200-day moving average. This led the cryptocurrency to touch the lower boundary of its sideways trading range. If this boundary is breached unexpectedly, it could lead to a continuation of the bearish trend.
Looking at Polkadot’s daily chart, a recent bullish ascent culminated at the critical 200-day moving average of $7.4, followed by a notable rejection. The cryptocurrency then underwent a decline, landing at a substantial support area represented by the lower threshold of its sideways trading range, positioned at $6. This lateral movement suggests the likelihood of ongoing consolidation, with a decisive and robust breakout from the $6 to $7.5 price range deemed essential for determining its future trajectory. However, a sudden breach of the $6 support zone could initiate a cascading effect, potentially driving prices toward the $5.5 mark.
On the 4-hour timeframe, Polkadot has exhibited fluctuations within an ascending wedge pattern, bounded by the $6 to $7.5 price range. After a brief surge, the price encountered resistance near a critical level, specifically the 0.5 Fibonacci level at $7.5, leading to a noticeable decline. This suggests the presence of heightened selling pressure around the crucial $7.5 resistance level, indicative of prevalent short positions in the market. If sellers break through the wedge’s lower boundary, it’s more likely that the initial bearish trend will pick up again. Conversely, if demand strengthens, sideways consolidation will probably continue.
Polkadot has remained trapped within a consolidation range, facing repeated rejections around the critical $7.5 level. This has stirred concerns about the future market conditions and the forthcoming direction of its price. Significant liquidity pools loom above the current market price, particularly near the $7.5 and $10 regions. This underscores the intensity of short positions in the perpetual market and identifies potential thresholds for their liquidation. If the price ascends to these levels, it could trigger a notable liquidation event, leading to a quick downturn. However, sentiment in the futures market presently leans bearish, with expectations leaning towards continuing the downward trend. A bullish rebound could spark a substantial short-squeeze event, resulting in a rapid upsurge.
