DOT is oversold after a recent bearish spell pushed it to three-year lows.
The lackluster sentiment among investors suggests the recovery may not be easy.
Polkadot’s native cryptocurrency DOT will likely make most investors reconsider their decisions after its latest performance. It continued to expand the downside and hit a new local low.
To recap, DOT’s overall performance since February has been bearish. At press time, its price was down 53% from its peak price in 2023. At the time of writing, it was trading at $3.67. What’s more, this week’s continued collapse has sent altcoins to new three-year lows.
The current situation is not good and liquidity may not be that sufficient.
There is also a good chance that DOT will struggle to rebound. This is because low liquidity has been starving the market. It may still be a while before strong liquidity in the altcoin space returns.
As of press time, there is some uncertainty about DOT’s ability to rebound strongly. The latest decline is often followed by a strong rebound. However, press time sentiment for cryptocurrencies suggests investors are not that confident about a recovery. The latest data from the Weighted Sentiment Indicator suggests that interest in DOT is low.
DOT’s on-chain trading volume also points to a lack of excitement, as volumes remain within normal two-week ranges. Assessments of derivatives markets show funding rates remain negative. This suggests that bulls may struggle to drive a meaningful economic recovery.
These findings may indicate that the DOT may continue its bearish price action in the coming weeks. Alternatively, selling pressure could subside, followed by sideways price action. While these are theoretical scenarios, traders should note that Polkadot has just launched its latest parachain auction.
If you were hoping this would spark enough bullish demand, you may be disappointed. Parachains may encourage those who intend to support the auction to purchase DOT. However, demand levels are typically too low to have a significant impact on the price of DOT.
Parachains may not impact price, but they are an important part of Polkadot’s operations. They stressed that new projects will come online soon, potentially helping the network expand.
