The Polkadot price has crashed over the past few months and is now hovering at its lowest level in years. The DOT token plunged to a low of $3.40, down by double digits from the highest level this year. It has plunged from last year’s high of $11.65.
Analyst Explains the Polkadot Price Crash
A crypto analyst has identified the top reasons why the Polkadot price has been in a free fall and underperformed other top altcoins. In a lengthy thread, an analyst known as Coco first debunked the notion that Polkadot treasury spending was contributing to the crash.
In this, he noted that 330,000 DOT tokens are created daily, with 280,000 of these going to stakers and validators. 49,000 of these DOT tokens are allocated to the Treasury, while a recent report noted that the Treasury spent just $ 520,000 in DOTs over the last four months.
As such, the analyst believes that even if the Treasury were to dump all the tokens, their impact on the market would be limited, given that the daily trading volume stands at over $272 million.
READ MORE: Top Analyst Explains Why the Polkadot Price is About to Surge
The analyst believes that the Polkadot price has crashed due to ongoing whale selling. These investors have sold over $10 million in tokens in the past few weeks, leading to more sell-offs.
He also noted that the liquidations from leveraged trades, the sell-off of staking rewards, and market maker rebalancing were the reasons for the sell-off. Additionally, he cited falling buyer demand, waning market sentiment, and the broader market sell-off.
The Polkadot price has other potential catalysts that may drive it higher in the coming months. First, there are signs that its ecosystem is booming, with the Hydration total value locked jumping to a record high of $136 million. Hydration is a key player in Polkadot, offering staking, lending, and trading capabilities.
Furthermore, Mythos Chain, a leading para-chain, is one of the largest players in the NFT space, handling over $39 million in the last 30 days. Other top players in the Polkadot ecosystem are FIFA Rivals and Moonbeam.
Second, the final stage of the Polkadot 2.0 transition is about to be unveiled. Additionally, Polkadot boasts one of the highest staking yields in the cryptocurrency industry, at 12%. The SEC may also approve the DOT ETF in the coming weeks or months.
DOT Price Technical Analysis
The daily chart shows that the DOT price bottomed at $3.27 last week. Its lowest point was notable because it mirrors the lowest point in April.
Polkadot price has also formed a double-bottom pattern, a popular bullish reversal sign. Therefore, the token is likely to bounce back and possibly rebound to the key resistance level at $5.34, the highest point reached in May, representing an increase of over 58% from the current level.
A move above the neckline at $5.34 will confirm the bullish breakout and potentially hit the 50% retracement level at $7.45.
READ MORE: Polkadot Price Rises Amid Crypto Card Vote as Hot Token Surges
