Polkadot: what is it and how does it trade?

[MongiIG]

In this week’s Cryptoverse, we take a look at Polkadot - what it is, its current outlook, and how it's shaping up on the charts.

Kyle Rodda | Market Analyst, Australia | Publication date: Wednesday 19 October 2022

In this week’s Cryptoverse, we take a look at Polkadot - what it is, its current outlook, and how it's shaping up on the charts.

What is Polkadot?

According to the Polkadot website: 'Polkadot unites and secures a growing ecosystem of specialized blockchains called parachains. Apps and services on Polkadot can securely communicate across chains, forming the basis for a truly interoperable decentralized web.'

Parachains, or parallelizable chain, are individual blockchains that run in parallel with the Polkadot network. The Polkadot infrastructure is connected to and secured relay chain, which enables the interaction between different blockchains and external networks, including Bitcoin and Ethereum.

The system allows communication and connectivity across the expanse of different cryptocurrencies and blockchains and supports applications like decentralized finance, gaming, and smart contracts, amongst others.

Ultimately, Polkadot is all about advancing Web3 - or the next version of the internet. The mission underlying the Polkadot project is to create a web 'where our identity and our data is our own - safely secured from any central authority'. That is a completely decentralized web.

What is the outlook for Polkadot?

Like all cryptocurrencies and blockchain networks, Polkadot has felt the chill of the latest crypto-winter. The asset is down by nearly 90 percent from the highs it recorded at the top of the last bull market in November last year, making it one of the worst-performing major cryptocurrencies.

Are better times ahead for Polkadot? Naturally, as we have discussed in the past, price appreciation in Polkadot will depend on more accommodative macroeconomic and policy settings. However, there might be some reason to be optimistic about the growth and adoption of the network.

Polkadot continues to expand its reach in a crypto-world moving to greater interconnectivity and decentralisation. This is especially true for decentralised finance, which Polkadot is at the forefront of enabling. The network has released and plans to release more products, which help the process of decentralisation in the crypto universe and potentially consolidate itself as the top smart contract platform.

Source: Bloomberg

A look at Polkadot charts

Polkadot has experienced a significant drawdown since its high in November 2021. The token is down by roughly 90% and trades around the same levels it was at at the beginning of 2021.

There are tentative signs of a bottoming taking place for Polkadot. Price is finding significant support at $6.00, which was a previous resistance level before the token’s previous bull market. The weekly RSI is beginning to show a bullish divergence with price.

A rally above the 20-week moving average would potentially indicate the potential for further upside for Polkadot, with key resistance around $10.00. A break below $6.00 could indicate further bearishness and downside.

Source: IG