As the prices of bitcoin and other cryptocurrencies continue to rise, many traders are looking for an indicator that tells when - or if - the bull market will end. Some think they have found the answer in polkadot (DOT), the native token of the Polkadot blockchain, as a potential canary in the cryptocurrency coal mine.
Polkadot's market cap has overtaken XRP and litecoin and is now the fourth largest cryptocurrency by market cap, according to Messari's asset tracker.
Following in the footsteps of EOS in 2017
Those who use polkadot to predict the price of bitcoin follow the parallel with another altcoin, EOS. According to some analysts, there are parallels between bitcoin's 2017 bull market prices (quotation BTC) and EOS, the native cryptocurrency of the EOS.IO blockchain platform.
The same argue that Polkadot, a project initiated by Ethereum co-founder Gavin Wood and considered one of the so-called "Ethereum killers", shares characteristics and objectives similar to EOS.IO, also born with the ambition to replace Ethereum.
After the price of bitcoin reached its peak in 2017, many investors and traders took their profits and transferred them into EOS tokens. EOS prices hit an all-time high at the end of April 2018, after which the "crypto winter" was rumored to have begun. Claims that EOS and bitcoin prices were correlated in 2017 and 2018 are controversial.
“Correlation, not causation,” said Terry Wilkinson, CEO of Tokyo-based investment firm Anchor Value. EOS "The race to the top didn't end because EOS stopped pumping." EOS.IO “failed to achieve Ethereum's position and hype,” added Jason Kim, Anchor Value's chief investment officer. "Speed alone hasn't convinced enough people to accept EOS's rosy projections."
The case of bullish Polkadot in the 2020 bitcoin rally
Similar to EOS.IO, Polkadot is advertised as a blockchain that could replace the Ethereum domain. As a result, just as many investors were betting on EOS.IO in 2017 for its promise to acquire market share from Ethereum at the time, investors have now shown a "strong" appetite for Polkadot's DOT.
That said, many have expressed their doubts about DOT's possible correlation with bitcoin's latest bull run. The main drivers of this round are significantly different from 2017. Currently, the market is mostly in agreement that large institutional investors and the explosive DeFi subsector are the main driver behind the latest bull market.
Unlike the ICO boom, many traders and analysts say, DeFi's fast-growing industry has shown far greater potential with the ambitious goal of someday replacing the traditional financial world. In fact, although the “DeFi summer” has faded, the industry has remained quite active. Therefore, the rapid growth in DOT prices may just be a reflection of continued DeFi growth, as well as new updates and improvements to the project.
