Polkadot (DOT) has experienced significant volatility this year, with its price fluctuating from a high of $11.889 to its current struggle near the $4.00 mark. As the cryptocurrency hovers around a crucial support level, market participants are increasingly concerned about the possibility of DOT falling below its historical low of $2.00. This article assesses the key levels and market dynamics that could determine Polkadot’s fate.

Polkadot’s Struggles in 2024: A Year of Decline

Polkadot entered 2024 with strong momentum, trading at nearly $12.00, but this optimism quickly faded. Over the past year, DOT has underperformed relative to other major cryptocurrencies, recording a 3.36% decline that has erased much of its earlier gains. The downtrend has been consistent across both daily and weekly timeframes, raising concerns among investors and analysts alike.

At the time of writing, DOT is trading at $4.125, perilously close to the crucial support level at $4.001. This support level has historically played a pivotal role in Polkadot’s price movements, two significant rallies in the past. However, the current market conditions suggest that the buying pressure needed to sustain these rallies may be waning.

The Importance of the $4.001 Support Level

The $4.001 support level has been a critical juncture for Polkadot, triggering impressive rallies on two previous occasions. The first time DOT approached this level, it rebounded by a staggering 1144.19%. The second time, the rally was more modest but still notable at 197.15%. These historical surges underscore the importance of this support level in Polkadot’s price history.

However, the situation appears different this time around. The buying pressure that fueled these previous rallies seems to be dissipating, and the market sentiment is increasingly bearish. If DOT fails to hold this support level, it could face a steep decline, potentially revisiting its all-time low of $2.00.

Retail Investors and Open Interest: Signs of Weakening Support

One of the key factors contributing to Polkadot’s recent struggles is the noticeable lack of interest from retail investors. Open Interest (OI), a crucial indicator of market activity and liquidity, has declined sharply in recent weeks. According to data from Coin glass, DOT’s OI has dropped from $202.30 million to $178.9 million since August 25, 2024. This decline indicates that retail interest in sustaining DOT’s price is faltering, further weakening the support at $4.001.

Additionally, Coin glass data analyzed by AMB Crypto revealed that long positions in DOT have faced significant liquidations. Specifically, $339.93k worth of long positions have been eliminated from the market. This pattern suggests that traders who were optimistic about a price rebound have been overwhelmed by the prevailing selling pressures.

Technical Indicators Signal Further Declines

Technical analysis provides further evidence that Polkadot’s price may continue to decline. The Super Trend indicator, a trend-following tool that combines price movement data with the average true range, currently signals a downtrend for DOT. The price remains below the Super Trend line, indicating bearish conditions that are likely to persist.

The Relative Strength Index (RSI), another widely used technical indicator, also points to a potential decline. The RSI measures the speed and change of price movements and is currently reading 35.52 for DOT, suggesting that selling pressure could intensify. A reading below 30 typically signals that an asset is oversold, but with the RSI trending downward, it appears that DOT has not yet reached the bottom.

Potential Outcomes: Will DOT Hold, or Is a Collapse Inevitable?

As Polkadot teeters near the critical $4.001 support level, the market is at a crossroads. If DOT manages to hold this level, there is a possibility of a rebound, potentially reaching the $5.706 resistance level. However, this scenario seems increasingly unlikely given the weakening buying pressure and bearish market sentiment.

If DOT fails to hold the $4.001 support, the next major level to watch is the $2.00 all-time low. A breakdown below $4.001 could trigger a sharp decline, potentially dragging the price down to $2.00 or even lower. This would mark a significant setback for Polkadot, erasing much of the progress it has made since its inception.

Conclusion: A Critical Moment for Polkadot

Polkadot is facing a critical moment as it nears a major support level that could determine its short-term future. With retail interest waning and technical indicators signaling further declines, the risk of a drop below the $2.00 all-time low is real. Investors and traders should closely monitor the $4.001 support level in the coming days, as it could be the key to understanding whether Polkadot will rebound or continue its downward spiral.