Polkadot (DOT) has recently shown resilience, temporarily stalling further decline, but the tide may soon turn. The prevailing bearish sentiment, intensified by recent events, is poised to push the Layer 2 altcoin towards testing the $5 mark as a crucial support level.
The swift recovery of Polkadot’s price hinges significantly on the support from existing DOT holders and potential investors. Typically, the influx of fresh capital and heightened market participation serve as catalysts for an upward trajectory.
At the same time Arbitrum continues to push out good news. With the imminent launch of BOLD and increased transaction volumes, ARB’s potential starts to look incredibly bright. Let’s investigate the recent price dynamics in the world of Layer 2 blockchains, and project possible price swings both for DOT and ARB.
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Attracting investors is a challenge
However, Polkadot appears to lack the allure necessary to entice investors at present. This is evidenced by its Sharpe Ratio, currently languishing at -5.17, reflecting a negative risk-adjusted return. Such figures deter investors from engaging with the digital asset. With Polkadot’s Sharpe Ratio hitting a seven-month low, its price recovery prospects appear dim.
Moreover, retaining the interest of current DOT holders is paramount. Unfortunately, Polkadot is witnessing a drain in this aspect, as traders withdraw from the Futures market, further exacerbating the potential for price decline.
Forecasting DOT’s price
As of the latest update, Polkadot is priced at $6.6 on Gate.io, having undergone a substantial correction post the invalidation of the falling wedge pattern. Given the prevailing market conditions, DOT remains susceptible to further downside.
Should the $6.3 support level falter, Polkadot’s price could plummet to $5.7, marking a four-month low and potentially signaling a market bottom for 2024.
Nevertheless, if the $6.3 support holds firm, breaking through could prove challenging, potentially leading to a bounce-back for Polkadot’s price. According to the price prediction of Polkadot, in such a scenario, the token could aim to surpass the $7.00 mark, continuing its rally to negate the bearish outlook and target $8.
Arbitrum is building
Offchain Labs, the pioneering force behind the Arbitrum ecosystem, has unveiled Arbitrum BOLD on its testnet platform.
Arbitrum BOLD introduces the Bounded Liquidity Delay (BOLD), a cutting-edge dispute resolution protocol featuring interactive fraud proofs tailored for optimistic rollups. This innovation is designed to serve across various Arbitrum chains, empowering users to engage as validator nodes and contribute to the network’s consensus mechanism. Notably, BOLD incorporates robust defenses against delay attacks, a cybersecurity menace wherein malicious actors disrupt normal system operations by manipulating data flow.
In a statement released on Monday, Offchain Labs emphasized that BOLD ensures a predetermined upper limit on Arbitrum state confirmations on Ethereum, enabling a single, well-equipped entity to counter claims from multiple adversaries without engaging in one-on-one confrontations.
Arbitrum has emerged as one of Ethereum’s leading Layer 2 networks, boasting a considerable user base. Offchain Labs secured $120 million in funding, spearheaded by Lightspeed Venture Partners, in August 2021.
The genesis of BOLD
Offchain Labs introduced BOLD in August 2023 to address the inherent vulnerabilities of existing validation mechanisms on Arbitrum One and Nova. These protocols, reliant on fraud proofs for validation, currently operate under permissioned settings due to susceptibility to denial-of-service attacks.
Explaining the rationale behind BOLD, Offchain Labs elaborated that the novel validation approach ensures a fixed upper limit of 7 days on confirmation delays, resilient to delay attacks. With BOLD, validation of Arbitrum chains can transition to a permissionless model, significantly enhancing decentralization.
Arbitrum price forecast ahead of token unlocks
Unlocking tokens can serve as bearish catalysts, particularly when recipients are poised to swiftly capitalize on their holdings. This influx of tokens into a project’s circulating supply without a corresponding surge in demand creates an imbalance, tilting the scale in favor of supply. The imminent token unlocks scheduled for the Arbitrum network this week add to the volatility anticipation for traders.
This week, the Arbitrum network is set to unlock 92.65 million ARB tokens, valued at around $107 million, constituting 3.49% of the network’s circulating supply. The allocation of tokens includes portions designated for the Arbitrum team, future team members, as well as future advisors and investors.
In the previous unlocking event on March 16, approximately 1.11 billion ARB tokens, representing 41.89% of the circulating supply, were distributed among the team, future team, advisors, and investors. Following this event, the price of Arbitrum experienced a significant decline of over 10%. If historical patterns hold, a similar downward trend could be expected for the Ethereum Layer 2 (L2) token.
Despite an attempted recovery on Sunday from its Saturday low of around $0.85 per ARB, the price of Arbitrum faces staunch resistance to further upward movement. As traders adopt cautious stances to avoid being ensnared by liquidity drains during exits, the price of Arbitrum is at risk of further decline.
A probable scenario entails a retest of the psychological support level at $1.00, potentially marking a 10% downturn. In a more adverse scenario, the price could plummet to the Saturday low at $0.8556, constituting a 25% decrease from current levels.
Conversely, heightened buying pressure could trigger a robust upward surge, propelling the ARB price beyond the 200-day Simple Moving Average (SMA) at $1.45. However, for the bearish outlook to be invalidated, the price must breach and sustain closure above $1.73.
Achieving a breakthrough beyond this critical level and BOLD being priced in, which aligns with the 50-day SMA at $1.71, would likely attract more buyers, propelling the ARB price beyond the projected target.
Layer 2 Spotlight: Polkadot’s Price Trajectory and Arbitrum’s New Protocol
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