Polkadot (DOT), the second largest smart contract protocol in the valuation cryptocurrency market behind Ethereum, has risen almost 30% in the past 24 hours. Polkadot’s market cap also exceeded $ 10 billion, strengthening its position as the fifth crypto asset.
The strong uptrend of DOT can be explained by several major reasons: strong technical structure of the market, anticipation of scalable blockchain networks and craze around DeFi.
Strong technical market structure and rising sentiment
In December 2021, DOT hit a new all-time high, rising to around $ 11. Since that time, it has continued to experience strong momentum and strong recoveries in key areas of support.
On January 13, Michael van de Poppe, a full-time trader at the Amsterdam Stock Exchange, highlighted the resilience of DOT.
He said if DOT falls in the key support areas, say $ 7.5, he would likely see a rally to a new all-time high. Van de Poppe wrote:
“Polkadot is one of the most powerful bouncers today because he has reached one of the levels I have scored previously. Probably a bit more consolidation, however, I think it’s only a matter of time before I see $ DOT above $ 20. “
Since then, DOT has rallied above $ 11 and reached a valuation of $ 10 billion, firmly securing its place in fifth place in the top ten above Litecoin.
DOT is now at 30% of a rally far from surpassing XRP, which still has a market cap of over $ 13 billion despite an ongoing lawsuit by the United States Securities and Exchange Commission (SEC) against Ripple.
At the same time, the price rally also coincides with a surge in daily sentiment, according to data from The tie.
Expectations of scalable blockchain networks due to popularity of DeFi
By the end of 2020, the total value stuck in DeFi exceeded $ 22 billion after a year of explosive growth.
Major protocols, such as Aave, Maker, and Uniswap, all exceed $ 2 billion TVL, with Maker alone housing more than $ 4 billion in locked-in capital.
However, a major issue with Defi has been Ethereum’s scaling issues. Although DeFi protocols plan to move to layer two solutions, the high fees on Ethereum have caused usability issues for DeFi users.
Maple Leaf Capital, a team of researchers focused on speculating and building Web3, said in its 2021 prediction that Polkadot would likely launch infrastructure and application improvements. They said:
“Libra / ETH 2.0 + L2 / Polkadot equivalent has triggered the infrastructure wheel, resulting in app improvements and vice versa, where ecosystems and stacks compete for capital and talent. Personally, I favor open and permissionless blockchains. “
Polkadot is considered a competitor to Ethereum in the sense that it allows smart contracts to operate in an ecosystem of smaller blockchains, called parachains.
With parachains and a network of various blockchains, Polkadot is able to process data more efficiently, allowing large decentralized applications to run without scalability issues.
When parachaines are active for the foreseeable future, Polkadot is expected to support large-scale DeFi protocols and decentralized applications.
Overall, the combination of DOT’s bullish technical market structure and positivity around Polkadot’s smart contract infrastructure is contributing to its prolonged rally.