Polkadot (DOT), the second largest smart contract protocol in the cryptocurrency market in terms of valuation behind Ethereum, is up nearly 30% in the past 24 hours. Polkadot’s market cap has also surpassed $ 10 billion, cementing its position as the fifth largest crypto asset.
There are several main reasons behind DOT’s strong uptrend: a strong technical market structure, anticipation of scalable blockchain networks, and the craze surrounding DeFi.
Strong technical market structure and rising sentiment
In December 2021, DOT hit a new all-time high, rising to around $ 11. Since then, it has continued to see strong momentum and recovery in key support areas.
On January 13 Michael van de Poppe, a full-time trader on the Amsterdam Stock Exchange, pointed out DOT’s resilience.
He said if DOT falls to key support areas, say $ 7.5, it would likely rally to a new record high. Van de Poppe wrote:
“Polkadot is one of the strongest bouncers at the moment as it reached one of the levels I highlighted earlier. Probably a bit more consolidation, but I think it’s only a matter of time before we see $ DOT above $ 20. “
Since then, DOT has rallied above $ 11 and reached a valuation of $ 10 billion, firmly securing its fifth spot in the top ten over Litecoin.
DOT is now 30% rally away from overtaking XRP, which still has a market cap of more than $ 13 billion despite an ongoing lawsuit by the U.S. Securities and Exchange Commission (SEC) against Ripple.
At the same time, the price hike also coincides with a surge in daily sentiment, according to data from The tie.
Expectations from scalable blockchain networks due to DeFi’s popularity
At the end of 2020, the total value trapped in DeFi was more than $ 22 billion after an explosive year of growth.
Top protocols, such as Aave, Maker and Uniswap, all exceed a TVL of $ 2 billion, with Maker alone housing more than $ 4 billion in locked-down capital.
A big problem with Defi, however, was Ethereum’s scaling issues. Although DeFi protocols plan to move to layer two the high fees on Ethereum have caused usability issues for DeFi users.
Maple Leaf Capital, a team of researchers focused on speculation and construction of Web3, said in their forecast for 2021 that Polkadot is likely kickstart infrastructure and application improvements. They said:
“Libra Equivalent / ETH 2.0 + L2 / Polkadot kick-started the infrastructure, driving application improvements and vice versa, with ecosystems and stacks competing for capital and talent. Personally, I lean towards open, permission-less blockchains. “
Polkadot is considered a contender for Ethereum in the sense that it enables smart contracts in an ecosystem of smaller blockchains called parachains.
With parachains and a network of different blockchains, Polkadot can process data more efficiently, allowing large decentralized applications to run without scalability issues.
When parachains come live in the near future, Polkadot is expected to support large-scale DeFi protocols and decentralized applications.
Overall, the combination of DOT’s optimistic technical market structure and the positivity surrounding Polkadot’s smart contract infrastructure adds to the expanded rally.