Cryptocurrency Market Round-Up

Typically, cryptocurrencies are termed as digital currencies and use blockchain technology to record every transaction. Polkadot (DOT) is an open source blockchain network that was introduced in 2020. Users can manage or operate their blockchains on this vast network of blockchains. DOT has a market capitalization of ~USD 5.49 billion (as per TradingView as of October 26, 2023).

Last week, the benchmark S&P Cryptocurrency Broad Digital Market (BDM) Index started on a positive note and maintained a bullish momentum for the entire week. The index advanced by 150.97 points (~8.07%) to 2020.68 for the week ending October 20, 2023. In the current week starting October 23, 2023, the index is trading with positive momentum. Moreover, other major cryptocurrencies, such as Bitcoin and Ethereum, are witnessing bullish momentum for the current week.

Having understood the S&P Cryptocurrency BDM Index movement over the last week and the scenario for the upcoming week, one cryptocurrency that seems ‘Attractive’ at the current level appears to be Polkadot (DOT) based on the below technical parameters: -

Polkadot (DOT):

Noted below are the generic insights, indicative entry price, support, and resistance levels for the next 1-2 weeks duration for the DOT:

Entry level and Resistance Levels as mentioned herein are only indicative in nature as per trend analysis and further evaluation is required when looking at cryptocurrency under discussion.

Note: The reference Information in this report has been sourced from TradingView.

DOT Technical Analysis Summary (On the Daily Chart):

On the daily chart, DOT’s prices are trading above the falling trend line support zone at the USD 4.028 level and continuously taking support from the trendline, indicating positive biasness in the price action. Moreover, the prices are trading above the trend-following indicators 21-period & 50-period SMAs, which may act as a support level. Further, the leading indicator RSI (14-period) is showing a reading of ~65.98 level, indicating positive momentum.

The momentum indicator MACD histogram is trading above the centerline, supporting a positive stance. Moreover, the prices are trading above the Parabolic SAR indicator, which may act as a support level. Now the next resistance level appears to be at USD 4.95, and prices may test this level in the coming sessions (1-2 weeks).

Noted below are the key positives and negatives when looking at Polkadot (DOT) in the cryptocurrency space: -

Advantages of DOT:

• High degree of transparency: Through several livestreams, conferences, and press releases, the team has been incredibly transparent.
• Flexibility: According to the team, Polkadot should be as versatile as possible so that it can support any kind of blockchain.

Disadvantages of DOT:

• High level of competition: Tezos, Cosmos, and Cardano are just a few examples of the general-purpose, Proof of Stake blockchains that compete with Polkadot, while Ethereum, the market leader, has already demonstrated entrenched network effects.

Conclusion:

Based on the above-mentioned price action analysis and technical indicators outlook, Polkadot (DOT) may witness movement in an upside direction. The trend looks to be in an interesting space and the currency looks ‘Attractive’ given the current price of USD 4.368 (as on October 26, 2023, at 07:20 PM, (GMT+11) Time in Sydney NSW, Australia. However, volatility in the price should be borne in mind when looking at further evaluation for investment scenarios. Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while making investment decisions.

Related Risks: Based on the technical analysis, the risks are defined as per risk-reward ratio (~0.80:1.00), however, returns are generated within 1-2 weeks’ time frame. This report may be looked at from high-risk perspective and recommendations are provided are for a short duration. Recommendations provided in this report are solely based on technical parameters, and the fundamental performance of the cryptocurrency has not been considered in the decision-making process. Other factors which could impact the cryptocurrency prices include market risks, regulatory risks, interest rates risks, currency risks, social and political instability risks etc.

Note 1: When a Cryptocurrency price is expected to move upward in the short-term (1-2 weeks), it is termed as 'Attractive’, while if a downward movement in prices is expected in a Cryptocurrency it is termed as 'Non-Attractive'. In general, for an ‘Attractive’ cryptocurrency an exit position can be considered if the Resistance Levels or Indicative Stop loss mentioned as per the technical analysis has been achieved. If the cryptocurrency looks ‘Non-attractive’ an exit position can be considered if the Support Levels or Indicative Stop loss mentioned as per the technical analysis has been achieved. Investment decision should be made depending on an individual’s appetite for upside potential, risks, and any previous holdings. This recommendation is purely based on technical analysis, and fundamental analysis has not been considered in this report.

Note 2: How to Read the Chart?

The Green colour line reflects the 21-period simple moving average (SMA) while the red line indicates the 50-period SMA. SMA helps to identify existing price trends and if the prices trade above the 21-period and 50-period SMA, then in general it shows an uptrend trend.

The Black colour line in the chart’s lower segment is a 14-period Relative Strength Index (RSI) which indicates momentum in trend. A reading of 70 or above suggests overbought status, while a reading of 30 or below suggests an oversold status.

The Blue colour bars in the chart’s lower segment show the volume of the Cryptocurrency. The volume is the quantity that changed hands during the given period. Cryptocurrencies with high volumes are more liquid compared to lesser once and higher volumes help in easier and faster execution of the order.

The Orange colour lines are the trend lines drawn by connecting two or more price points and used for trend identification purposes. The trend line also acts as a line of support and resistance.

Technical Indicators Defined: -

Support: A level at which the Cryptocurrency prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the Cryptocurrency and if the price breaches the level, then Support 2 may act as the crucial support level for the Cryptocurrency.

Resistance: A level at which the Cryptocurrency prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the Cryptocurrency and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the Cryptocurrency.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the Cryptocurrency prices.

A trailing stop-loss is a modification of stop-loss in case of favourable movement in the price to protect the gains. It is suggested to Trail the Stop-Loss as per the aforementioned levels if the Cryptocurrency price achieves more than 60% of the Resistance 1. individuals, in general, might consider exiting from the position as per the Trailing Stop-Loss level if the price starts moving downwards after achieving more than 60% of Resistance 1. However, these indications need further evaluation basis associated risks and any change in trends.

The reference date for all price data, currency, technical indicators, support, and resistance levels is October 26, 2023, at 07:20 pm, (GMT+11) Time in Sydney NSW, Australia. The reference data in this report has been partly sourced from REFINITIV.

Abbreviations

CMP: Current Market Price

SMA: Simple Moving Average

RSI: Relative Strength Index

USD: United States dollar

Note: Trading decisions require a thorough analysis by individuals. Technical reports in general chart out metrics that may be assessed by individuals before any Cryptocurrency evaluation. The above are illustrative analytical factors used for evaluating the Cryptocurrency; other parameters can be looked at along with additional risks per se. Past performance is neither an indicator nor a guarantee of future performance.

Disclaimer -

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