3 reasons why Polkadot could be the next altcoin to hit a new all-time high
Layer-1 smart contract platforms increased their market share throughout August after the Ethereum network London hard fork did little to solve the major issues of high transaction fees and network congestion.
One top-10 protocol that has been gaining momentum, but has yet to experience a significant price breakout to new highs like some of its competitors is Polkadot (DOT), a multichain protocol focused on facilitating the creation of cross-chain bridges between separate blockchain networks.
Data from Cointelegraph Markets Pro and TradingView shows that after bottoming out at $10.36 on July 20, the price of DOT increased 205% to an intraday high at $31.70 on Aug. 31 as the chatter of an impending altseason begins to rise.
Three reasons for the increasingly bullish outlook for DOT are its upcoming parachain auctions, a rapidly growing ecosystem of projects interested in launching on the network and a steady increase in daily trading volume.
Parachain auctions excite the community
One of the biggest drivers of momentum for the Polkadot ecosystem is the upcoming parachain auctions where projects vie for community votes to obtain one of the limited slots available to launch on the network.
The upcoming $DOT parachain auctions should drive up demand for Polkadot.
The token rewards for the $KSM auctions have been amazing, and I’m accumulating and staking $DOT in anticipation of this. pic.twitter.com/AehiTuyfSw
— CRYPT0SM0G (@Crypt0Sm0g) August 27, 2021
Polkadot’s “wild cousin” Kusama has been in the process of conducting its auctions, with the first batch having been chosen at the end of July and the second batch of auctions scheduled to begin on Sep. 1.
As part of the parachain crowdloan process, users vote for projects by locking up DOT tokens for a designated term as a way to bootstrap funding for projects that are chosen to fill one of the limited slots.
This has the effect of reducing the circulating supply of tokens available adding pressure on the price of DOT. The Polkadot network will undergo its own parachain auctions once all auctions are complete on the Kusama network. The process has been fully audited and to date, the Kusama-bas parachains are running smoothly.
An entire ecosystem of projects are competing for a parachain slots
Another reason for the recent strength of DOT is the large number of projects interested in obtaining a parachain slot and launching on the network.
As evidenced by the graphic above, the Polkadot ecosystem has seen extensive growth in terms of protocols and supporting infrastructure over the past year and this is outmatched by only a small number of competing networks in the space.
With the Polkadot parachain auctions expected, it’s likely that the ecosystem will continue to expand and welcome new projects and proof of this comes from the fact that the Kusama parachain process has thus far been a relatively smooth .
Related: Will Polkadot save decentralized finance from Ethereum’s scaling problems?
24-hour trading volume on the rise
A third reason for the bullish outlook for DOT has been its surging 24-hour trading volume which is now back at levels not seen since the market-wide sell-off in late May.
$DOT Also seeing large relative breakout volume today pic.twitter.com/ricI5dvppp
— Traderhank (@Traderhankhill) August 31, 2021
According to data from CoinMarketCap, DOT’s 24-hour trading volume surged more than 300% on Aug. 31 to a high of $5.41 billion as anticipation for the upcoming Kusama parachain auctions excited the Polkadot investors who view KSM’s success as a proxy of what can occur with DOT price.
If the Kusama network can continue the smooth rollout of its auction process and clear the way for the process to begin on the Polkadot network, the demand for DOT could rise and this could translate to higher prices for the asset.
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