Global crypto market cap is down more than 0.64%, most large cap altcoins have had a rather gloomy day. However, as always, there are a few exceptions and Polkadot (DOT) is one of them.
DOT currently ranks 8th by market capitalization and has grown over 15% in the past 24 hours to currently $ 41.6.
DOT. Price chart | Source: Tradingview
As highlighted in a recent report, most of the DOT metrics are pretty impressive too. Hence, the current bullish phase of the DOT is not surprising.
Parachain is currently trending and inspires many investors. But is it really worth it?
The essence of parachain
With the presence of over a thousand public blockchains, the crypto space has turned into a multi-chain universe where each chain specializes in something unique.
However, interoperability has been a major barrier in this area and has indeed made the market appear more fragmented than it actually is.
Polkadot tried to solve this problem with his distinctive approach. It is designed to run two different types of blockchain.
- The first type is a relay chain (mainnet), where transactions are usually permanent in nature.
- The other (Parachain) is usually user-created and inserted directly into the main block chain to benefit from its security.
In fact, parachains can interact with each other within the system and exchange data and assets and also connect to external networks such as Bitcoin and Ethereum via bridges. They also offer a host of other features, including fork-free upgrades – something Ethereum has never done or offered before.
Skip the story about the catalyst
Parachain auctions have been going on for some time on Kusama – Polkadot’s sister chain. These auctions are essentially held for the shortlisted parachains to be added to the Kusama relay chain.
The parachain auction on the Kussama network starts in mid-June. The first five auctions of the first round ended on July 19, and each auction lasted at least a week with a break to assess the performance of the network, and the second round began on August 31.
The auction for 11th place only ended yesterday (October 13th).
Source: Kusama Network
For most investors, one would expect such events to act as a price catalyst, right? This did not happen with Kusama (KSM). During the first round, which ran from mid-June to mid-July, KSM’s price fell 68%. However, it increased by 100% in the reporting period.
With the beginning of the next auction round, KSM begins to lose value again. On the 6th day of the auction, KSM lost almost 30%. So are these auctions just a discount catalyst? Not so.
In the period from June to July, the market saw a large drop in the price of coins, which is often the result of a “flash crash”. Likewise, September was not a great month for the broader market historically. Like most cryptocurrencies, KSM is also struggling.
In fairness it can be said that macro factors have more influence on KSM than its inherently positive developments.
KSM. Price table | Source: TradingView
Given the location in Kusama, one shouldn’t expect Polkadot’s parachain auctions to act as a catalyst.
However, that does not mean that the DOT rally will not continue. It just means that the auctions don’t give the DOT any additional area of support.
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Disclaimer: This article is for informational purposes only, not investment advice. Investors should research carefully before making a decision. We are not responsible for your investment decisions.
According to AMBCrypto