Polkadot indicator? Data Shows ETH Price Changes Follow DOT
Editor's Note: This article comes fromBabbitt Information (ID: bitcoin8btc)Editor's Note: This article comes from
Babbitt Information (ID: bitcoin8btc)
Babbitt Information (ID: bitcoin8btc)
, Author: MARCEL PECHMAN, Compiler: Overnight Porridge, published with permission.
The data shows that the price movement of Polkadot token (DOT) is a predictor of ETH price movement in the past few weeks. What is behind this trend?
For many cryptocurrency experts and investors, market capitalization and “big reversals” are important indicators of value.
Anyone who has been involved with cryptocurrencies since 2017 will recall the heated discussions surrounding the ETH and BTC rollover, the same commotion that occurred when BCH and EOS entered the top 5 by market capitalization.
Similar to Ethereum, Polkadot aims to become a decentralized application network, and the main contributor to the project is former Ethereum co-founder Gavin Wood.
Although it has been less than 30 days since the DOT token went live on major exchanges, it is eye-catching even for professional traders. Interestingly, its weekly transparent transaction volume of $600 million is comparable to that of established cryptocurrencies such as BCH and LTC.
In addition, the price change of DOT seems to be 15 minutes to 4 hours ahead of ETH.
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Small cap altcoins follow ETH and BTC price movements
Typically, the price movement trends between ETH and its indirect competitors will be very similar.
Even so, sometimes some of these altcoins move ahead of ETH. For DOT, this effect can partly be explained by its lower transaction volume and the fact that 77% of the total supply is concentrated in 100 wallets.
It’s worth noting that some cryptocurrencies limit the amount of staking or voting per address, which causes whales to split their positions and further distorts the ranking of holders. Regardless, DOT's attention is prominent, as is ChainLink (LINK).
As shown above, DOT was the first token to hit a new high on the day of September 12th, while it was also the first to start a downtrend, although these events themselves may have been the exception, of course.
Oddly, this pattern seems to repeat itself, even though it leads ETH by about 15 minutes - 4, 5 hours.
The chart above depicts two separate rallies that occurred earlier. Both DOT and Cosmos (ATOM) rallied ahead of ETH and then fell ahead of the next day.
However, in the past two weeks, the market movements shown by DOT seem to be unusual. The chart below is a bit more telling, as the rest of the cryptocurrencies have remained relatively flat compared to DOT’s impressive price movements.
First, both ETH and DOT made new local highs in early September. During this period, DOT started to rebound about 2 hours earlier than ETH, and it also started the reversal trend earlier than ETH.
On September 2, both ETH and DOT reversed their trend. This is in stark contrast to XTZ, LINK, and ATOM, which either peaked late or failed to reach new highs on September 1.
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Is this pure luck, or a pattern?
Pinpointing the causes and consequences of this short-term trading phenomenon is nearly impossible, and some large investment funds that participate in a diversified basket of cryptocurrencies may explain the current unique price action.
