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Polkadot Price Analysis

  • Polkadot is a sharded multichain enabling other blockchains to mint their own native coins, and access data from one another and off-chain sources
  • Polkadot’s native coin, DOT, has caught the crypto community by storm, becoming a top performer since its debut in mid-August 2020
  • Investors are bullish on DOT’s long-term potential due to a mix of strong technology, clear leadership, an active community, and favourable price action

At the time of this writing, Polkadot (DOT) is trading at $4.14 USD with a market capitalization of $3,529,229,406. It currently ranks #8 on Coin Market Cap, sandwiched between Chainlink (LINK) and Cardano (ADA) at #7 and #9, respectively.

Polkadot has been enjoying a boost in its public profile thanks to its role in Decentralized Finance (DeFi). It begs two questions: what role is Polkadot playing in Defi? And what makes DOT special? In this article, we’ll answer those questions, cover its price movements, and forecast its future position.

Gateway to Web 3.0

Polkadot’s development started in 2016. Stewarded by the W3 Foundation, Polkadot is a step towards Web 3.0, a new paradigm in web interaction which prioritizes decentralization. The network officially launched on May 26, 2020.

Polkadot allows different blockchain networks to operate together, making it a sharded multichain protocol. In other words, the network can process transactions on several chains in parallel. Without getting too technical, these chains run parallel to Polkadot’s relay chain, making them parachains.

Polkadot uses a hybrid consensus protocol that they refer to as GRANDPA/BABE, which is different from Proof of Work and Proof of Stake.

One could argue that Polkadot is ushering in the third generation of cryptocurrency alongside the likes of Cardano. It aims to solve the problems of the first and second generation of cryptocurrencies (think Bitcoin and Ethereum, respectively); namely, governance, scalability, and interoperability.

The team behind Polkadot is providing grants to help develop the ecosystem.

A Rocky Start

The DOT token, which is used for governance, staking, and bonding on the Polkadot network, had a tumultuous journey to the crypto exchanges. Exchanges like Kraken and Binance listed DOT on August 18, three days before the agreed-upon date. Ethereum co-founder turned W3 founder, Gavin Wood, called out the exchanges for putting the Polkadot community at risk.

DOT’s journey on Coin Market Cap started on August 20, 2020, when it opened at $2.69. It soared over 200% just eight days later, eventually reaching an all-time of $6.84 on September 1. The price then dropped below $5 in the days following and began testing that very threshold throughout most of September.

DOT dropped to ~$4 on September 21 and has been trading within that range since then, even dipping to ~$3.75 on October 7.

Bring out the Bulls

The market sentiment has generally cast Polkadot in a favourable light. There’s a few factors at play. The first is Gavin Wood’s prestige. He’s one of the most decorated developers in the smart contracts space. After all, he co-founded Ethereum, which is known for its innovations in smart contracts.

Wood was also integral in crafting Ethereum’s solidity programming language and Parity Technologies, not to mention he played a key role in growing the Ethereum Network since 2016. Polkadot’s technology is just as strong.

Another key factor that hints at DOT’s growth is that Polkadot does not directly compete with Ethereum. As a multi-chain ecosystem, Polkadot is structurally different from Ethereum.

Polkadot also has an active community, with more projects being announced all the time.

Ethereum and W3 co-founder, Gavin Wood

The last explanation for Polkadot’s popularity is its role in DeFi. Various DeFi projects have chosen Polkadot as their home because the network offers interoperability, and of course, parachains. As of early September, there is approximately ~$8 billion of total value locked in DeFi projects, a four-fold increase since June, and it’s only just beginning.

Polkadot shows no signs of stopping, either. RockX, a digital asset development company, announced a $20 million program to support the Polkadot ecosystem over the next five years. 

The network also recently released Substrate 2.0. Substrate is the name given to Polkadot’s blockchain building framework. This development will bolster a blockchain’s capabilities by leveraging off-chain data.

Future Price Predictions

Back in August, Kelvin Koh of Spartan Black, a major cryptocurrency fund based in Asia, predicted that DOT would reach $5. He was right, with DOT rising to as high as $6.57.

Soon after, Koh predicted that Polkadot would become one of the top three cryptocurrencies on CoinGecko and Coin Market Cap.

It’s too early to tell if Polkadot will rise through the ranks but its growth has been meteoric so far, entering the top 5 of cryptocurrencies as of September 15, so it might not be a parabolic prediction.

What’s even more curious is how DOT’s price action was acting as a predictor of Ethereum’s movements as of mid-September. Maybe it was intentional, but it was likely a coincidence given DOT’s short trading history.

The challenge in predicting DOT’s price action is simply the lack of available data. DOT has been on the crypto exchanges for less than two months.

Still, DOT’s short-term outlook is fairly bearish, having seen a general downward trend for weeks, but its long-term prospects are bullish. Digitalcoinprice.com is bullish on DOT’s five-year outlook. They predict the price will reach $6.44 in 2020, $7.27 in 2021, and $14.69 in 2025.

There are some Youtubers out there who predict DOT will reach $67.65 in 2021. Others share the same short-term bearish attitude before predicting DOT will climb again, in line with Digitalcoinprice.com’s view.

With a combination of strong tech fundamentals, high-calibre leadership fronted by Gavin Wood, an active community, its role in DeFi, and exponential growth that caught many people in the crypto community by surprise, one thing is certain: everyone has their eyes on Polkadot.

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