Polkadot (DOT) has raised eyebrows in the past few months, as interoperability-focused altcoins have increased 625% in the past three months.
The promise that interoperability between blockchains will be a viable solution to the high Ethereum gas fees weighing on the crypto market has made Polkadot’s development of parachutes attractive, and the number of projects building on DOT is growing alongside its popularity as a deployment platform continue.
Polkadot parachutes work similarly to the Ethereum 2.0 sharding proposal, which is used to create independent blockchains built for a specific purpose. Many projects building on Polkadot, such as Moonbeam, Equilibrium, and Acala, are developing their own parachutes in which the project’s tokens serve as local currency to pay for transactions.
DOT token price, USDT at Binance. Source: TradingView
According to Staking Rewards, over 63% of the DOT coins in circulation are locked in staking mechanisms. Meanwhile, Polkadot’s development seems to be ahead of the competition. According to PolkaProject, a site that tracks development activities, over 370 projects are currently actively building on the platform.
Polkadot’s aggressive pace of development and the looming expectation of the official launch of the Parachain Mainnet in 2021 have seen the DOT price of its futures contracts grow immensely.
DOT futures aggregate open positions. Source: Bybt.com
In the past two months, DOT futures open interest rose 690% from $ 73 million to $ 575 million, becoming the fourth largest derivatives market behind Bitcoin (BTC), Ether (ETH), and Cardano (ADA).
Surprisingly, Litecoin (LTC), which has ranked third since the beginning of futures contracts, lost its established position. Additionally, the data suggests that this wasn’t a purely technical adjustment, as Polkadot’s on-chain and trade metrics far outperform Litecoin.
It’s worth noting that DOT’s open positions were reduced 23% between February 21-27, as the price fell 27% to $ 28.
The DOT trading volume and the on-chain metrics will be strengthened
Regardless of the price movement, the low trading activity reflects a lack of interest from traders and a reduced influx of new market participants.
LTC, ADA, DOT 10-day average trading volume, USD. Source: TradingView
Although the trading volume of DOT started from a much lower base three months ago, it spiked in January while Litecoin fell 50% from a high of $ 13 billion a day. Meanwhile, DOT’s total spot trading volume on exchanges has risen to $ 4.3 billion, an increase of 660%.
DOT daily active addresses. Source: polkadot.subscan.io
Polkadot’s on-chain metrics also provide insights into increasing usage from 1,600 active addresses per day to 6,000. The 275% growth for a network that started mainnet less than eight months ago seems impressive.
It may take some time for Polkadot’s on-chain metrics to approach the hundreds of thousands of active Litcoin and Cardano addresses. However, this is not a problem given the development of technology.
The VORTECS ™ Score, exclusive to Cointelegraph, is an algorithmic comparison of historical and current market conditions derived from a combination of data points such as market sentiment, trading volume, recent price movements and Twitter activity.
VORTECS ™ Score (green) vs. DOT price. Source: Cointelegraph Markets Pro
In addition to the increasing open positions on the most important futures exchanges, the VORTECS ™ value rose to 80 on February 26th and 27th. In the following five days, the DOT price rose by a further 13%.
Polkadot’s “flippening” of Litecoin’s open-interest futures signals that investors are far more interested in scaling and interoperability potential than in Litecoin’s narrowly focused search for data protection through the integration of the MimbleWimble protocol.
The relatively small number of active addresses of DOT should be monitored in the future, but should no longer hinder the price increase of the token from now on.
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