Polkadot skyrockets practically 30% to $10 billion market cap: What’s behind the rally?

Polkadot (DOT), the second-largest sensible contract protocol within the cryptocurrency market by valuation behind Ethereum, is up practically 30% within the final 24 hours. Polkadot’s market capitalization has additionally surpassed $10 billion, solidifying its place because the fifth-biggest crypto asset.

There are a number of main causes behind DOT’s robust uptrend: robust technical market construction, anticipation of scalable blockchain networks, and the craze round DeFi.

DOT/USDT each day value candle chart (Binance). Supply: TradingView.com

Sturdy technical market construction and rising sentiment

In December 2021, DOT reached a brand new all-time excessive, rising to round $11. Since that interval, it has continued to see robust momentum and robust recoveries at key assist areas.

On Jan. 13, Michael van de Poppe, a full-time dealer on the Amsterdam Inventory Change, pinpointed DOT’s resilience.

He mentioned that if DOT drops to key assist areas, e.g. $7.5, it will seemingly see a rally to a brand new all-time excessive. Van de Poppe wrote:

“Polkadot is among the strongest bouncers at present because it hit one of many ranges I’ve marked beforehand. In all probability some extra consolidation, nevertheless, I believe it is only a matter of time earlier than we see $DOT above $20.”

Since then, DOT has rallied above $11 and reached a $10 billion valuation, firmly securing its place on the fifth spot within the high ten above Litecoin.

DOT is now a 30% rally away from overtaking XRP, which nonetheless has a market cap of over $13 billion regardless of an ongoing lawsuit by th U.S. Securities and Change Fee (SEC) in opposition to Ripple.

On the similar time, the worth rally can also be coinciding with a surge in each day sentiment, in keeping with knowledge from TheTie

DOT value and sentiment (each day). Supply: TheTie

Expectations of scalable blockchain networks on account of DeFi’s reputation

On the finish of 2020, the whole worth locked in DeFi surpassed $22 billion after an explosive yr of progress.

Prime protocols, corresponding to Aave, Maker, and Uniswap, all exceed a TVL of $2 billion, with Maker alone housing over $four billion in locked capital.

Nonetheless, one main situation with Defi has been the scaling problems with Ethereum. Albeit DeFi protocols are planning to maneuver to layer two options, the high fees on Ethereum have induced usability points for DeFi customers.

Maple Leaf Capital, a group of researchers targeted on Web3 hypothesis and constructing, mentioned of their 2021 prediction that Polkadot would seemingly kickstart infrastructure and application improvements. They said:

“Libra equal / ETH 2.0 + L2 / Polkadot set off the flywheel of infrastructure prompting software enhancements and vice versa, whereby ecosystems and stacks compete for capital and expertise. I personally bias in direction of open, permissionless blockchains.”

Polkadot is taken into account a contender to Ethereum within the sense that it permits sensible contracts to run in an ecosystem of smaller blockchains, known as parachains.

With parachains and a community of assorted blockchains, Polkadot is ready to course of knowledge extra effectively, enabling giant decentralized purposes to run with out scalability issues.

When parachains come reside within the foreseeable future, Polkadot is anticipated to assist large-scale DeFi protocols and decentralized purposes.

General, the mixture of the optimistic technical market construction of DOT and the positivity round Polkadot’s sensible contract infrastructure is contributing to its prolonged rally.