Polkadot’s Bearish Trends

Polkadot formed a bearish head and shoulders pattern on its one-day chart, indicating a potential drop to $3.47.

Polkadot (DOT) was trading at $7.20, reflecting a 2% increase in the last 24 hours. However, its trading volume saw a 9% decline, totaling $290M.

Despite a 16% climb over the past week, bearish signs have emerged on the one-day chart, signaling a possible correction.

Head and Shoulders Pattern

The recent head and shoulders pattern on Polkadot’s chart usually precedes a significant bearish trend. After attempting to rally towards the crucial resistance at the neckline, $7.56, DOT was rejected multiple times, indicating weakened buyer activity.

If this resistance level holds, selling pressure might increase, potentially leading to a drop of over 50% towards $3.47. The Chaikin Money Flow (CMF) showed that selling pressure exceeds buying pressure, supporting this bearish outlook. Additionally, the diminishing histogram bars on the Bollinger Band Trend indicator suggested weak bullish momentum, further hinting at a possible downtrend.

If buyers wait for a breakout above $7.56, DOT could rise toward the next resistance at $9.20.

Declining Network Activity

Polkadot’s network activity has been declining, which may hinder potential gains. TokenTerminal metrics indicate that network revenue and user numbers are at multi-week lows. Daily active users have dropped to 4,200, the lowest in 30 days, with revenues falling to $1,118. Continued inactivity could reinforce bearish trends, leading to further price decreases for DOT.

Liquidation Heatmap

The liquidation heatmap for Polkadot shows no immediate liquidation levels above or below the current price. If this leads traders to avoid seeking liquidity, the price may consolidate. However, a significant liquidation zone exists at $6.80, where a drop could trigger a cascade of long liquidations, pushing the price even lower.