- Polkadot price has been in a strong bullish trend in the past few weeks.
- The rally is mostly because of its close correlation with Bitcoin.
Polkadot crypto price drifted higher on Wednesday as cryptocurrencies rallied. DOT jumped to a high of $7, which was its highest point since November last year. In the same period, other coins like The Graph, Jasmy, and The Sandbox continued rising.
Why is DOT soaring?
Polkadot price has done well in 2023. It has jumped by over 62% from its lowest level in 2022. This rally happened amid challenges in Polkadot’s ecosystem. Most parachains, including Moonbeam and MoonRiver, have continued to struggle to gain market share.
Similarly, Enjin, an NFT-focused product, has struggled as the volume of traded non-fungible tokens (NFTs) dropped. On a positive side, Enjin’s Efinity platform was approved by Japan’s regulator, meaning that developers can now mint and sell NFTs in its ecosystem.
Another positive is that Polkadot has the second-largest developer activity in the industry. Analysts expect that this activity will keep growing with the upcoming launches of OpenGov and parathreads.
The main reason why DOT price has jumped is because of its close correlation with Bitcoin. According to IntoTheBlock, Polkadot and Bitcoin have a correlation coefficient of almost 1. This means that DOT rises when BTC rises and vice versa.
Find out how to buy Polkadot.
The two coins are rising for two main reasons. First, there is a view that cryptocurrencies, just like high-growth tech companies, became extremely oversold in 2022 as the Fed hiked interest rates. Most coins declined by over 50% during the year while well-known companies like Tesla saw their shares tumble by over 70%. In most periods, investors tend to buy oversold assets.
Second, Polkadot is rising because of the rising expectations that the Federal Reserve will start pivoting with inflation falling. The most recent data showed that inflation dropped from 7.1% in November to 6.5% in December.
However, the Fed has insisted that it will continue hiking, especially with the strong jobs numbers. Data published on Friday showed that the unemployment rate dropped to 3.4% as the economy added over 500k jobs.
Polkadot crypto price forecast
On the 4H chart, we see that the DOT price has been in a bullish trend in the past few weeks. It has formed an ascending channel that is shown in red. The coin is now at the middle of this channel. Also, it seems to form a double-top pattern and a gravestone doji.
Also, it remains slightly above the 25-period and 50-period moving averages. Therefore, I suspect that Polkadot will retreat and retest the lower side of the channel at around $6.50.
