Polkadot's Canary In The Coal Mine

Louis Sykes
June 2, 2021

To gauge any market trend, we must look under the surface at the components themselves.

This is true for Stocks, Commodities, Bonds, and even Cryptocurrencies. It's Universal.

For instance, when discussing Smart Contract Platforms like Polkadot or Ethereum, we evaluate whether the bulls are diving deep into the projects of the other offerings in the ecosystem.

This is Technical Analysis 101, and it goes back to Charles Dow in the 1800s looking for confirmation of the major averages.

Over 130 years later, in entirely new assets, the same principles govern markets.

In this case, we're looking at Polkadot's first project release and Canary Network, Kusama $KSM.

Similar to how Litecoin is seen as the experimental little brother to Bitcoin, any new additions to be implemented on Polkadot go through Kusama first.

For this reason, the two trade very much in tandem.

So how about this divergence?

While Polkadot is still way below all this former support, Kusama is back above it all, putting in a failed breakdown.

Did Kusama just tip the hand for Polkadot here?

If DOT's above those former lows near 28, we can be long with a target back at the upper bounds of its prior range near 43.

And here's the ratio of the two:

There's not much price history here to establish a correlation, but seeing as KSM is Polkadot's Canary/Experimental Network, it theoretically carries more risk, meaning new highs in this ratio could signal risk appetite in this ecosystem and Crypto as a whole. We perform a similar exercise with the Silver/Gold ratio, for example.

Yesterday we wrote about leaning on winners. If these are truly failed breakdowns, it's only wise to anticipate these two reassume their former leadership roles moving forward.

Skipping ahead, here's a quick recap of how the other top currencies performed yesterday.

A lot of red, but Dogecoin was the standout.

Zooming into the 4-hour chart, we're closely monitoring the 0.42 level, which represents both former support and the 38.2% retracement from this whole correction. If we're above that, we can tactically own DOGE with a very near-term target of 0.5350, representing a 25% move.

That's today's scoop on the Crypto space, hope you enjoyed it!

In case you missed it, you can download our new Crypto Chart Book here.

Be sure to let us know if you have any questions.

Allstarcharts Team.

 

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