Will the DOT/USD bottom hold? Technical analysis

  • Polkadot holders who bought at higher prices are currently at a loss.
  • If the price remains above a certain low point, there is still a chance for a bullish scenario.
  • If the price goes above $7, there could be more gains.

It has been a difficult time for those who have held onto Polkadot for a long time. The exchange rate for DOT/USD has been consistently dropping since it peaked at $56 in late 2021.

The price went from $56 to $5 in a straight decline. This has frustrated those who were bullish about Polkadot for a year.

Even now, as cryptocurrencies have rallied in 2023, looking at the daily chart can be scary. The bounce from the lows looks so small when considering the bigger picture that it is hard to find a bullish argument.

Chart of Polkadot, provided by TradingView

Polkadot should overcome the $7 resistance area for bulls to be in control

Zooming in, one may see the 2023 rally that brought back optimism in the cryptocurrency market. However, Polkadot has already lost more than half of its YTD gains.

But there is still a chance for a bullish scenario. The recent price action may be nothing more than a correction part of a bigger bullish trend.

Chart of Polkadot, provided by TradingView

According to the Elliott Waves theory, an impulsive move (i.e. the one that began at the start of the year) is followed by a corrective structure, an a-b-c.

This a-b-c that corrects a bullish trend should have two waves moving in the opposite direction (i.e. waves a and c), and one that moves in the main trend’s direction.

This means that the move from the 2022 lows is an impulsive structure, and the decline from the 2023 highs is the a-b-c. In this case, the implications are bullish for Polkadot and bearish for the US dollar.

However, only a move above the pivotal $7 level would confirm the bullish Elliott Waves scenario. Until then, bulls might wish for the price action to stay above the invalidation area shown on the chart above.