The price of Polkadot has managed to grow by 100% in recent weeks. The state of the Pulkadat derivatives markets and the fundamental factors of this digital currency indicate that this strong uptrend is likely to continue.
to the Report Coin Telegraph, the Polkadot porcelain blockchain project is designed to create a network of side chains. These side chains, known as parachutes (parallel chains), operate independently of the network. Each Pulkadat side chain has a specific function and uses the Substrate modular framework. Using this framework enables developers to easily develop their projects on Polkadot.
Polkadot has been in the spotlight of digital currency developers and investors since the beginning of 2021. This is while the massive market reform we saw in May is also affecting this digital currency. On the other hand, not much news was published about the development of Polkadot during this period.
July 22 (July 31) The first decentralized exchange on Polkadot, Karura Swap, begins operations. Acala, one of the projects funded by Coinbase Ventures, has been responsible for launching Carora Swap. Coin Base Ventures is the investment arm of Queen Base.
The price of Polkadot has risen 100% in the last 24 days and has managed to regain the $ 20 level. However, the current price is 50% lower than the $ 50 peak of this digital currency. At the moment, it seems that investors do not know where Polkadot will go in the future. Polkadot had previously faced heavy resistance at $ 22.
What is the difference between Polkadot and Kosama?
Polkadot refers to a set of parachutes that are connected to a platform and are referred to as a “support chain”. This platform is in fact the foundation of the network that determines and manages sections such as the consensus protocol, certainty and logic of voting.
On the other hand, we have Kusama, which is the original and raw version of Polkadot. Kosama can be considered a trial version of Polkadot for examining areas such as governance, equity and sharding in real economic conditions.
Therefore, even if Carura Swap does not operate directly on the Polkadot blockchain, it can still prove its performance and capabilities.
Status of Derivatives Markets
The technical situation of the Pulkadat market may give us a bullish outlook for the price of this digital currency, but the main question is whether the situation of derivative markets also confirms this data or not.
For example, if we do not have premium futures, it means that investors are reluctant to create long positions (buy) and use leverage in these transactions. The decrease in the volume of transactions in instant exchanges shows that there is not much interest in the current price situation of Polkadot. This situation is even more worrying due to the widespread growth of Polkadot prices.
Analyzing Polkadot open futures contracts allows us to understand the current sentiment in the market. Open futures contracts, instead of considering the number of daily traders, only consider accounts that have open positions.
After reaching a peak of $ 1.2 billion, the index fell to $ 340 million on April 17 (April 28). Despite being much lower than its peak, it is still in the range it was in early February (February 99) despite the $ 20 price of Polkadot.
Balance in the use of levers
Short (sell) and long (long) contracts are the same at all times, but the levers used in the situations are different. Examining the difference between the financing rate and the status of derivatives transactions, it can be concluded in which direction investors are most interested in using leverage.
As can be seen in the chart above, from mid-July to early August, the funding rate was largely negative, indicating that investors in short positions were willing to use higher leverage. A negative rate of 0.05 percent per 8 hours is equivalent to a rate of 1 percent per week. The situation has reversed over the past two weeks, after the index was between zero and 0.04 percent. Zero to 0.04 is commonly referred to as the neutral zone.
When we look at the market through the lens of derivative markets, the state of the financing rate and open contracts do not show us a sign that the market is rising. On the other hand, there is no indication that investors are using high leverage in their trades or that the market sentiment after the recent jump is too high, which are themselves positive signs.
Both indicators are currently neutral. It seems that the performance of Polkadot in the future will largely depend on the development of the ecosystem of this digital currency.