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Rising trading volume, investor enthusiasm over future parachain auctions, and the success of KSM have investors eyeing DOT as the next cryptocurrency to reach a new high.
After the Ethereum network London hard fork accomplished little to address the major issues of high transaction costs and network congestion, layer-1 smart contract platforms grew their market dominance throughout August.
One top-10 protocol that has been gaining momentum, but has yet to experience a significant price breakout to new highs like some of its competitors is Polkadot (DOT), a multichain protocol focused on facilitating the creation of cross-chain bridges between separate blockchain networks.
Data from TradingView shows that after bottoming out at $10.36 on July 20, the price of DOT increased 205% to an intraday high at $31.70 on Aug. 31 as the chatter of an impending altseason begins to rise.
Three reasons for the increasingly bullish outlook for DOT are its upcoming parachain auctions, a rapidly growing ecosystem of projects interested in launching on the network and a steady increase in daily trading volume.
Parachain auctions excite the community
One of the biggest drivers of momentum for the Polkadot ecosystem is the upcoming parachain auctions where projects vie for community votes to obtain one of the limited slots available to launch on the network.
The upcoming $DOT parachain auctions should drive up demand for Polkadot.
— CRYPT0SM0G (@Crypt0Sm0g) August 27, 2021
Polkadot’s “wild cousin,” Kusama, has been holding auctions, with the first batch selected at the end of July and the second batch planned to begin on September 1.
Users vote on projects by locking up DOT tokens for a set period of time as part of the parachain crowdloan process in order to bootstrap funds for companies that are chosen to fill one of the limited slots.
This has the effect of limiting the available circulating supply of tokens, putting downward pressure on the price of DOT. Once all auctions on the Kusama network have concluded, the Polkadot network will hold its own parachain auctions. The process has been fully audited and to date, the Kusama-bas parachains are running smoothly.
An entire ecosystem of projects are competing for a parachain slots
Another reason for the recent strength of DOT is the large number of projects interested in obtaining a parachain slot and launching on the network.
The Polkadot ecosystem has witnessed significant expansion in terms of protocols and supporting infrastructure over the last year, as indicated by the graph above, and this is matched by just a limited number of competing networks in the field.
With the Polkadot parachain auctions coming, the ecosystem is likely to continue to develop and welcome new initiatives, as seen by the fact that the Kusama parachain process has thus far been quite straightforward.
24-hour trading volume on the rise
A third reason for the bullish outlook for DOT has been its surging 24-hour trading volume which is now back at levels not seen since the market-wide sell-off in late May.
— Traderhank (@Traderhankhill) August 31, 2021
According to CoinMarketCap data, DOT’s 24-hour trading volume increased more than 300 percent on Aug. 31 to a high of $5.41 billion, as anticipation for the upcoming Kusama parachain auctions piqued the interest of Polkadot investors, who see KSM’s success as a proxy for what can happen with DOT price.
If the Kusama network can maintain the flawless deployment of its auction process and pave the ground for the process to commence on the Polkadot network, demand for DOT may increase, resulting in greater asset prices.