Polkadot’s (DOT) recent 256% rally in the last 56 days has been nothing short of spectacular. Although the price is still 23% below its all-time high of $ 49.80 from four months ago, the altcoin’s market capitalization of $ 39 billion has outperformed Ether (ETH) by 66% in the last month.
Polkadot is a blockchain network designed to support several interconnected and application-specific parallel chains, known as parachains. This scalability-focused project splits transactions into multiple shards and processes them in parallel, similar to what ETH 2.0 intends to do.
Polkadot refers to the entire ecosystem of parachains that connect to a single base platform known as the Relay Chain. This base layer provides security to the network and handles the logic of consensus, finality, and voting.
To support parachain launches, users vote for projects by locking their DOT tokens. At present, only Kusama (“canarian” network and an early, unpolished release from Polkadot) is holding its own auctions for these parachain slots. Polkadot is expected to begin the same process in the coming months.
Polkadot’s DeFi integration increases
The Polkadot ecosystem has been growing steadily and on September 8, SubQuery, a decentralized data aggregator, raised $ 9 million to create Polkadot’s first data aggregation layer.
As an example of this integration, the parachain Moonbeam has tokens developed on Polkadot’s Substrate architecture. These tokens can be seamlessly sent to Ethereum wallets and smart contract addresses. On September 9, Moonbeam announced a partnership with Lido, a decentralized liquid staking protocol currently deployed on Ethereum and Terra.
The latest update came from dTrade, a decentralized exchange. After raising smoothly, $ 6.4 million in a rinitial funding wave in May 2021, DEX raised other market-making funds of $ 22.8 million designed to provide “deep liquidity” backed by some of the biggest market makers in the crypto space.
Derivatives data show potential for a new all-time high
Technical analysts are quick to make price predictions, but investors should look at Polkadot derivatives market data. For example, a non-existent futures premium means that investors are not comfortable opening leveraged long positions.
Total open interest in DOT futures grew to USD 685 million, in front of USD 360 million 30 days ago, and this is a positive indicator because it reflects the willingness of leverage traders to keep their long positions open despite the rally.
In futures trading, both longs (buyers) and shorts (sellers) are paired at all times, but their leverage can vary. Eventual imbalances are reflected in the funding rate and derivatives exchanges will charge the party that uses the most leverage to balance that risk.
The constant development of protocols will be the definitive driver of the DOT price.
In the first week of September, a healthy dose of optimism was reflected as the 8-hour financing rate reached 0.10%, which is equivalent to 2.1% per week. However, the situation was reversed after the 35% collapse in prices on the morning of September 7.
This intraday low of $ 22.70 from a week ago might seem irrelevant as the DOT token price is above $ 36, but traders’ appetite for leveraged long positions has yet to recover.
The most probable case is that of “glass half full”, in which investors will regain confidence as the project continues to meet expectations.
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