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- Polkadot’s price decline to $6.50 has traders interpreting the dip as a buying opportunity, eyeing a potential 50% rally.
- Despite bearish trends and a head-and-shoulders pattern, Polkadot’s $6 support level highlights buyer confidence and market resilience.
Polkadot (DOT) has faced a turbulent December, reflecting both challenges and opportunities. After its impressive gain of 125.75% in November, DOT’s value has been under pressure, sinking to $7.16 earlier this week. This downward movement highlights profit-taking by investors but also reveals a critical support level that traders are closely watching.
As of December 20, the Relative Strength Index (RSI) stands at 37.20, slightly above the oversold conditions. Additionally, the Stochastic Oscillator (STOCH) is at 34, reinforcing a balanced sentiment. These indicators align with analysts’ views that the cryptocurrency may be gearing up for a significant move.
Polkadot’s price entered the critical 0.5 and 0.618 Fibonacci range during its recent decline. Historically, this zone has acted as a pivot point, often leading to a resurgence in demand. On-chain data supports this, showing $1 million in spot outflow on Friday morning—marking 5 straight days of outflows from Dec. 16, according to Coinglass.
Traders Spot Dip, Eye 50% Rally Potential
Traders have begun interpreting the latest dip as an accumulation opportunity, with the potential for a rally of up to 50% if demand picks up triggered by the Polkadot 2.0 upgrade set for Q1 2025, as CNF previously reported. Meanwhile, DOT’s funding rates have been climbing steadily for the past four days, reflecting an increase in long positions.
Data from Coinglass reveals that 90% of all DOT/USD perpetual addresses on Binance are long, signaling renewed optimism. However, the broader longs vs. shorts ratio across multiple exchanges still leans slightly bearish.
In the derivatives market, sentiment is shifting as DOT’s price consolidates near $6.50. Analysts point to a Head and Shoulders pattern forming on technical charts. The price currently seems to be breaking down below the “neckline” (a support line connecting the troughs between the left shoulder, head, and right shoulder).
A head-and-shoulders pattern is typically considered a bearish reversal pattern. It indicates that the uptrend is likely coming to an end, and further downward movement is expected. Once the neckline is broken, the price often falls, with the potential target being the pattern’s height (from the neckline to the head) projected downward.
$6 Support Holds the Line
Polkadot’s ability to maintain support at $6 underscores buyer confidence despite the recent bearish trends. The cryptocurrency’s supply of over 1.5 billion tokens ensures liquidity, further bolstering its resilience. Analysts agree that breaking through the $9 resistance is crucial for any upward movement, with trading volumes likely determining the trajectory in the coming days.
The broader crypto market’s reaction to the latest Federal Reserve meeting also influenced Polkadot’s mid-week dip. As the market adjusts to macroeconomic pressures, Polkadot traders remain divided—some anticipating further downside, others banking on a bullish comeback.