Kusama has marched its way into today’s best-performing blockchain protocols after announcing the details of its next parachain auctions. The announcement acted as a catalyst that has so far fueled significant gains for KSM, the native token on the Kusama network.

KSM is currently trading at $341.79 after rallying by 19% in the last 24 hours. The coin has so far gained by 24% in the last 7 days, extending the gains that it has enjoyed since the market turned bullish towards the end of July. The coin has almost doubled after bottoming out at $142 which was its lowest point since February and now its latest rally has sent it back to June levels.

Source: Binance

The parachain auction announcement provided the boost necessary to push KSM above its 99-day moving average, further confirming the strong bullish momentum. Despite its recent gains, KSM still has a long way to go before reaching its previous all-time high of $625 which was achieved at the height of the previous bull run in May. This means there might be room for it to test those previous highs if the bulls extend their dominance long enough.

What are parachain auctions and why are they fueling KSM’s rally?

Parachains are project-specific chains that run parallel to the main blockchain on networks like Kusama and Polkadot. They allow projects to run on the network’s layer 1 blockchain while leveraging its security and other features. Parachain auctions provide an opportunity for promising projects to bid for slots available on Kusama’s relay chain.

The parachains on Kusama which is Polkadot’s canary network are highly sought after, while the auction provides a fair avenue for the most qualified projects. The network previously held six successful parachain auction slots and the latest update has revealed the dates for the upcoming five auctions. The bidding for the sixth parachain auction will start on September 1 and will end on September 8, after which the next one will begin. The entire process will be completed by September 29.

Parachain auctions are an important demand driver for KSM which is necessary for the bidding. Projects stake their KSM tokens to participate in the auctions and the higher the tokens staked, the more the likelihood of winning. This is important considering that the token has a very limited amount of KSM in circulation at just 8.47 million tokens.

So far 1,114,629 KSM tokens have been locked as part of the previous auctions and they will be locked until May 13, 2022. More tokens will be locked up courtesy of the upcoming parachain auctions, which means the number of tokens in circulation will reduce. If that is the case, then the additional demand by projects competing for the parachain auctions will provide a lot of upside for KSM.

The latest pump in Kusama’s native token makes more sense now that we understand how the parachain auctions influence the supply and demand for KSM. The token will likely experience some more upside in the next few days as KSM tokens are scooped up in preparation for the next round of parachain auctions.