Polkadot Price Sinks to Pre-2021 Levels

The cryptocurrency industry has been suffering from the effects of the bear market for nearly 11 months now, which started roughly around November 11th, 2021. Ever since then, the prices have been going down quite consistently, with a few short breaks during which cryptos either attempted to stabilize their prices or maybe pushed for a small recovery before the drop continued.

This has been the situation throughout the market, but we are still interested in individual projects, as each coin and token performs differently, even when bound together by a common trend. Today, our interest lies with Polkadot (DOT) — a project that set out to solve scalability and interoperability issues, and along the way, it became one of the biggest and most popular crypto projects in the industry today.

What is Polkadot?

Polkadot is classified an open-source sharded multichain protocol that has the ability to connect and secure a network of specialized blockchains. In doing so, the project is facilitating cross-chain transfers of any type of data or assets across multiple blockchains. That means more than just tokens, as the project can offer full interoperability of the connected chains.

It was structured perfectly to provide a foundation for the future version of the internet, the so-called Web3, which will run on the network of blockchains connected to one another. Polkadot’s idea is for it to be at the heart of the network.

The project was originally created to try to solve the scalability issues that networks like Ethereum suffered from for a long time. Essentially, Ethereum and other older networks cannot scale to meet demand, and so people have to wait for long periods to have their transactions processed. The only way to speed things up is to offer higher transaction (gas) fees to make the transactions more attractive to miners, who would then choose to process them sooner.

This led to a rise in the average gas fee price, which made the use of such blockchains too expensive. However, the rise in fees is only a symptom of the true problem, which is the lack of scalability. So, Polkadot came up with its own solution, which was to create parallel chains called parachains.

As the name suggests, parachains run alongside the project’s main chain, and their purpose is to take over a portion of the work, thus reducing the load on the main network and allowing the transactions to get processed as soon as they arrive, rather than have to wait for their turn. Parachains were a genius invention as they have other purposes, too.

For example, they can function as independent blockchains, and they can even serve as bridges between Polkadot and other chains in the crypto industry. As a result, they can allow the project to achieve interoperability and create the foundation for the network that could eventually grow into Web3 or at least become a major part of it.

Polkadot price performance

All of the mentioned features and advantages brought Polkadot to the attention of the crypto industry very quickly, and it did not take long for it to rank quite high among its peers. The project has spent 5 years in research and development, only to hold a multi-stage launch that started in May 2020 and ended on December 18th, 2021.

However, the project’s cryptocurrency, DOT, has already launched around August 21st, 2020, which is where the available price data begins. In those early days, the DOT token’s price was at $2.87, and it spent the next four months close to this level, but with small attempts to surge which rarely took it past $5 or $6. This continued until the end of 2020, and while Bitcoin was already skyrocketing past its former ATH of $20,000 around this time, the altcoin market had yet to follow.

Polkadot was among the first altcoins to surge, starting its climb around Christmas day, December 25th, 2020. At the time, it was sitting at $5.2, and by January 1st, it had already climbed to $8.3. Roughly two weeks later, it more than doubled its price, reaching $18.18.

As weeks kept passing, Polkadot kept surging. Weeks turned to months, and by May 14th, the project had skyrocketed to $47.95. This was around the time when a major crash interrupted the price surge, around the same time when Elon Musk announced that Tesla would stop accepting Bitcoin payments due to the coin’s massive carbon footprint.

Bitcoin crashed following the news, taking the entire crypto industry down with it, and Polkadot followed. The token went from $47.95 on May 14th to $10.98 on July 20th. This date marked another turn in the crypto industry as the entire market started recovering. There were several projects that managed to launch themselves back up sooner, but for the majority of projects, July 20th marked the second bull run of 2021.

Polkadot hits an ATH

This second run has been even better to Polkadot than the first one. The project’s progress was equally sharp, but this time, it managed to overcome all previous barriers and even hit a new all-time high.

This happened on November 4th, when the project hit $53.88, only days before the bullish market ended, and the bears took over. Interestingly, by the time the bear market started dominating the industry, Polkadot was already in the middle of a free fall, likely caused by its extreme surge between July and November.

This was a hype-induced price growth rather than a healthy, steady increase, and as such, it started suffering the consequences long before the rest of the market. But, the bear market still reached the coin, and while its drop may not have been so severe if the bulls were still dominating, the bears pushed it down to $24.7 around December 19th, where DOT saw the first support strong enough to temporarily interrupt its fall.

In the first week of January, it even managed to recover slightly to $31 during the pause that the bear market took. However, it quickly came back even harsher than before, forcing Polkadot to continue its drop, this time to a support at $15, which it reached in mid-February. After another brief period of recovery, during which DOT surged back to $23, the bear market returned yet again, sending DOT even deeper down this time to $6.2.

This was the lowest that the project has reached in 2022 and, indeed, the lowest since December 2020, which means that Polkadot officially reached pre-2021 levels. Over the last two months, the project’s price has been giving positive signals, and the market has picked up on it. But, while the investors may be optimistic, Polkadot’s price is still not showing signs of any real improvements. At the time of writing, it sits at $6.94, after sinking by 2% in the last 24h.

The market sentiment

With Polkadot being one of the biggest and most popular projects in the crypto industry — currently sitting as the 11th-largest crypto by market cap —  it is also commonly discussed in the crypto circles, which makes it fairly simple for investors to look into the fundamental analysis of the project.

Recently, for example, the community started becoming very bullish on Polkadot, especially since the reports revealed that the project’s development activity has been up in the last 7 days, despite steady price drops. One big reason why Polkadot managed to remain relevant is the fact that it carries several parachains, which managed, for the most part, to keep the users interested in buying, even though there was slight selling pressure in the last few days.

Another reason why Polkadot has been at the center of attention despite the steady price drop is the recent announcement that it is preparing to launch a new set of parachains, which led the community to move onto a high rise at a very slow speed. Still, this can change very quickly, and the situation surrounding DOT might be severely different fairly soon.

Experts say that Ethereum is still the most actively developed project, but Polkadot is moving in as a close second, which is a huge achievement for the crypto industry that has well over 20,000 coins at the moment.

Another thing to remember is that Polkadot was recently listed on the world’s oldest active exchange, Bitstamp, alongside Solana.

What will happen next?

The situation involving the project’s cryptocurrency does not look good at the moment, as Polkadot sits very close to the lowest position it ever had in its entire history. But, with that said, many theorize that the new update, as well as a number of positive developments such as the Bitstamp listing, could translate into a new price uptick.

Of course, it is very difficult for any single coin to go into the green when the market is so overwhelmingly bullish, but it is still possible with enough positive developments, and Polkadot certainly does not lack those at the moment.

With that said, investors are advised to keep a close eye on the project in the coming days, as the price could turn at any moment. Of course, with the crypto market, you can never be sure what will actually happen. However, if the bear market takes another break, or maybe even finally starts coming to a close after nearly a year of price dips, Polkadot is likely to be among the first to shoot up, and as such, the first sign of surging is likely to inspire many investors to buy.

To learn more about Solana, visit our Investing in Polkadot guide.