Polkadot price staged a strong comeback this month, and both its technicals and fundamentals point to a major surge in the coming months.
Polkadot (DOT) advanced to a high of $4.42 on Friday, July 18, its highest level since May 29. It remains 62% below its peak in November last year. Here are the top three reasons why DOT may be on the cusp of a strong rebound.
Polkadot ecosystem growth is continuing
The first reason why the DOT price may be on the verge of a strong bull run in the near term is that its ecosystem continues to expand.
For example, Mythos Chain, a parachain, has become one of the biggest players in the non-fungible token industry. Its network processed NFT transactions worth over $37 million in the last 30 days. This makes it the fourth-largest chain after Ethereum, Polygon, and Bitcoin.
Hydration, another top player in the ecosystem, has gained traction, with the total value locked in the ecosystem climbing to $248 million, up from $53 million in June.
Further, FIFA Rivals, a recently launched game on the network, has become highly popular with thousands of users. Polkadot’s ecosystem growth may accelerate following the end of the parachain auction process as part of its Polkadot 2.0 upgrade.
Proposal to reduce inflation
One reason the DOT price has crashed in recent years is that it is highly inflationary. The network mints over 500 million DOT tokens annually. These tokens are typically distributed to validators and stakers, many of whom sell them.
Gavin Wood, its creator, has proposed reducing this inflation from 500 million to 90 million tokens per year. He also aims to replace payments to validators with a technology known as Proof of Personhood or PoP, which gives each token holder voting power.
Wood hopes that this shift will pave the way for fairer governance, spam-resistant voting, and reduced reliance on capital power.
Polkadot price technical analysis
DOT price has declined sharply over the past few years, bottoming at $3 in June. On the daily timeframe, it has formed a double-bottom pattern, a common bullish reversal signal. Its neckline is at $5.40, over 20% higher than its current level.
It has also moved above the 50-day and 100-day Exponential Moving Averages, a sign that bulls are gaining momentum. Top oscillators like the Relative Strength Index and the MACD are both pointing upward.
Therefore, the token will likely continue rising, with the next level to watch at $7.36, a 66% gain from current levels. A drop below the support at $3.50 would invalidate the bullish view.
