While Polkadot’s native token DOT is down 10 percent in the past day, it is still up 50 percent in the past week after it has undergone an extreme rally, outpacing basically all other large-cap cryptocurrencies.
DOT is now the sixth-largest cryptocurrency in the world by market capitalization, having moved past Bitcoin Cash (BCH).
At one point, DOT had a market capitalization of around one-tenth that of the leading altcoin, Ethereum. This may be a validation that Polkadot may be seen as somewhat of a competitor to Ethereum.
DOT rallies 50% in a week
DOT is now up 50 percent in the past week, outpacing all other cryptocurrencies in the top 20 by market capitalization.
To put the cryptocurrency’s performance into some context, BTC is up by 20 percent in the past week and ETH is up 17 percent. Most other cryptocurrencies in the top 20 are actually down over the past week, falling as capital is focused on just a few key performers.
DOT’s rally also has a technical predicate.
Prior to the ongoing push higher, the cryptocurrency formed a triangle that signaled it was about to break higher.
What’s new with Polkadot?
Wilson Withiam from Messari says that the ongoing price action of DOT may be related to Polkadot, the underlying blockchain, about to gain a key feature.
“Recent market sentiment aside, Polkadot and Kusama are drawing closer to the arrival of parachains, which could be improving its near-term outlook. Right now, Polkadot is a staking and governance chain. Parachains should differentiate it and drive DOT’s intended utility.”
Parachains are a technology that will allow developers to deploy and allow users to use applications based on the Polkadot technology. Many believe that this will give the platform traction as a potential competitor to Ethereum, which has long reigned over the world of smart contracts and DeFi.
On Twitter, Bobby Ong, CEO of CoinGecko, said that DeFi applications could start migrating to other layer one platforms such as Polkadot:
“We will see existing DeFi apps launching on other Layer 1 platforms like Serum & Polkadot. Hard for me to imagine any other L1 platforms gaining a foothold. We will see a multi-chain Metamask-like wallet making it easier to connect to multiple blockchains.”
What’s important to point out here is that parachains are needed for this to work.
Interestingly, data indicates that there has been a large increase in the amount of Polkadot developers over recent months, boosting its outlook.