A popular crypto analyst is identifying what could help leading Ethereum rival Polkadot (DOT) recapture its all-time high.
In a new video, Coin Bureau host Guy tells his 2.07 million subscribers the reasons for DOT’s poor price performance.
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“First is the fact that the rest of the crypto market has been getting wrecked, notably [Bitcoin] whose price is strongly correlated with DOT’s.”
He says that DOT’s circulating supply has increased by around 55 million in the last four months, creating sell pressure that pushes down the price of the cross-chain platform.
The analyst says that Polkadot does not have enough demand to offset the sell pressure as the amount of DOT held by exchange-traded products for Polkadot fell by more than 70% since February. The crypto asset is also not required to pay for transaction fees on Polkadot’s parachains.
“The problem there is that the demand for DOT has been on the decline as the crypto bear market sets in and not just from retail investors…
The demand for DOT will probably increase as new use cases for it are introduced on these parachains. For now, the only real demand driver for DOT is coming from individuals and institutions who want to participate in Polkadot’s parachain slot auctions, which are ongoing.”
At time of writing, Polkadot is trading for $6.98. Guy names the key factor that could make DOT surge by 687% to get back its record high of $54.98.
“The silver lining is that more than 15% of DOT’s circulating supply has been committed to parachains, which means they will be out of circulation for two years. Unfortunately, the economic benefits of this will decline over time due to DOT’s annual inflation rate of around 7.5%.
I’ll reiterate that Polkadot’s parachains are likely to create more demand drivers for DOT, but whether DOT can eventually reclaim its new all-time highs ultimately depends on the project’s own upcoming milestones.”
Disclaimer: Opinions expressed at The Daily Hodl are not investment advice. Investors should do their due diligence before making any high-risk investments in Bitcoin, cryptocurrency or digital assets. Please be advised that your transfers and trades are at your own risk, and any loses you may incur are your responsibility. The Daily Hodl does not recommend the buying or selling of any cryptocurrencies or digital assets, nor is The Daily Hodl an investment advisor. Please note that The Daily Hodl participates in affiliate marketing.
Featured Image: Shutterstock/Warm_Tail/Albert Stephen Julius
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