DOT Price Analysis: Polkadot price rips through support and could sink below $4.0

Polkadot (DOT) price action tanked on Wednesday as global markets continued their sell-off, with equities leading the decline off the cliff. One of the scenarios on the table was that this last trading week trading would be very binary due to thin liquidity, and it could feel as if traders were flipping a coin on where they would next take price action. As the (snow)ball is rolling now, it is time to get out of the way in order not to get caught in an avalanche.

Polkadot set to trigger an avalanche of sell orders

Polkadot price is having a hard time as external headwinds determine which direction the DOT price action will go. The biggest determinant is the equity markets that have been continuing their selling spree since the beginning of December. As almost all three major equity indices dropped another 1% individually overnight, DOT price saw bulls defaulting on holding that $4.40 low for 2022.

DOT, meanwhile, is printing a new low near $4.30 and might be looking to rebound a little bit, but it is really in a no man’s land. There are no clean handles or pivotal levels in sight, which makes this bounce very fragile and questionable in its validity. Rather expect to see another decline of roughly 14% towards $3.76, which is the low for August 24th, 2020, to trigger a firm bounce and support for bulls to build upon.

DOT/USD daily chart

Taking the price action for Polkadot in November into the analysis, it becomes clear that DOT has been a sell-on-rallies, meaning that any pop higher got met with firm selling and, as a consequence, a new low was printed just a few days later. Should there be a pop higher this time, look for the break of the red descending trend line to indicate that the push behind the turnaround is solid. Once that happens, bulls will jump in on that break and push price action higher up towards $5.25 to test the 55-day Simple Moving Average, which will act as a cap.