Polkadot’s recent price action has shown signs of a potential correction after its impressive weekly performance. As the altcoin has begun to decline, market indicators are suggesting that the bearish sentiment is gaining strength. A critical aspect of this sentiment shift is the growing sell-off activity, with large amounts of DOT being moved from private wallets to exchanges, which typically signals an intent to sell.

Recent data from Coinglass highlighted that a substantial $125.72 million worth of DOT was transferred to exchanges, fueling fears of further selling pressure. This exchange netflow is indicative of traders anticipating a price drop and looking to capitalize on the short-term weakness.

Adding to this bearish outlook, a notable amount of long positions has been liquidated over the past 24 hours. According to recent reports, $1.21 million in long positions were wiped out, which signals that many traders who had hoped for an upward continuation are now facing significant losses. On the other hand, only $151,000 in short positions were closed, revealing that the market is currently tilted more towards the bears.

Where Is DOT Heading Next? Support Levels and Rebound Potential

With the current bearish sentiment building up, DOT is approaching key support levels that could play a pivotal role in determining its short-term future. Based on AMBCrypto’s latest technical analysis, the first support level to watch for is around $4.484. If DOT can hold this level and attract sufficient buying interest, there’s potential for a strong rebound. A recovery from this point could see DOT surge by as much as 73.39%, with a target price of $7.75, signaling a promising upside for the altcoin.

However, if DOT fails to maintain support at $4.484, the next level to watch is $3.940. At this lower support level, there could be enough liquidity to fuel a rally, but it may take time for the token to consolidate before pushing higher. The price action around these support levels will be crucial in determining whether the recent decline is just a temporary pullback or the start of a deeper downtrend.

Technical Indicators Point to Temporary Pullback

While the overall sentiment in the market appears bearish, technical indicators suggest that the recent decline may only be a temporary pullback. According to the Money Flow Index (MFI) and Chaikin Money Flow (CMF) indicators, Polkadot still holds some bullish potential despite the ongoing decline.

At the time of writing, the MFI stands at 56.99, and the CMF is at 0.20, both of which remain in positive territory. These indicators track volume and price movements to gauge market sentiment and are currently showing that while the price is declining, there is still some underlying buying pressure. This suggests that DOT may be experiencing a brief dip before continuing its upward movement, with the possibility of hitting new highs in the coming weeks.

The Bigger Picture: DOT’s Long-Term Outlook

Polkadot’s price action has recently been influenced by broader market trends, but its unique position in the blockchain ecosystem is one of the factors that gives it a strong long-term outlook. Polkadot’s interoperability features, which allow different blockchains to communicate and share information seamlessly, have positioned the project as a significant player in the cryptocurrency space.

As DOT continues to gain adoption and expand its use cases, its fundamentals remain solid. Additionally, the broader cryptocurrency market is still in a phase of recovery, and if Bitcoin and Ethereum continue to show strength, it could have a positive spillover effect on Polkadot and other altcoins.

Moreover, the potential 73% price surge from current levels is a realistic target given the volatility often seen in the altcoin markets. If the market sentiment turns bullish again and DOT successfully bounces from its support levels, the altcoin could easily test the higher price targets.

Final Thoughts: Watch Key Support Levels

In conclusion, while Polkadot is facing a temporary dip, there are key support levels to watch that could trigger a major recovery. If DOT can maintain its support at $4.484, the altcoin could see a rebound toward $7.75, marking a potential 73% gain. However, if the price falls below that support, traders will need to look for further confirmation at $3.940.

The current technical indicators point to a short-term pullback rather than a full trend reversal, so traders should be cautious but also watch for opportunities to buy if DOT reaches these support zones. As always, market conditions can change rapidly, and it’s essential for investors to stay informed about the latest price developments.

Polkadot’s potential for gains remains strong, especially if the broader crypto market continues to show positive momentum. However, for now, DOT must overcome short-term bearish pressure before it can reach new highs. Investors will need to closely monitor key levels and market sentiment to navigate this uncertain period.