Polkadot (DOT) and Kusama(KSM) slump after the auction-led rally—what’s next?

Yerevan (CoinChapter.com) – Both Polkadot (DOT) and its pre-production environment Kusama (KSM) tokens shifted bias and went bearish after a bullish rally around the launch of parachain auctions on June 8.

Parachain Auctions

Kusama, aka “Canary Network,” is a testnet blockchain network within the Polkadot ecosystem. It allows projects aiming to function atop the Polkadot blockchain to run sandbox tests before their full-scape deployment.

Gavin Wood, the founder of Kusama and Polkadot and the co-founder of Ethereum, commented on the parachain auctions’ launch, saying it is a “market-efficient way of selecting which parachains will be added to the Kusama Relay-chain and have their functionality become a part of the Kusama network.” 

The parachain actions are a pricey affair, requiring 1 million DOT, or approximately 22 million USD. Each auction will take a week, and there will be 100 auctions in total. The first auction launched successfully on June 15, and the results will be announced no sooner than June 22, at 7 a.m. ET.

Also read: Polkadot price pops on Coinbase Pro listing, $2mm funding, and parachain slot auction

Despite the positive buildup around the auction news, Polkadot and Kusama exchange rates plummeted once more.

Change of wind for DOT and KSM

The rally flipped to a decline after the US Federal Reserve raised its expectations for inflation this year and shifted the time frame for rate hikes from 2024 to 2023. As a result, the dollar index (DXY: the relative strength of USD against other currencies) reached its highest point since mid-April. Bitcoin, on the other hand, declined, together with smaller cryptos, including DOT and KSM.

The DOT exchange rate against USD lost 7 percent in value, reaching 21.9. The token sought support from a significant trendline on the daily chart. If DOT drops down to the margin once again, it has the chance to retest it in the upcoming New York session, with a possible rebound.

Also read: Bitcoin will meet its ‘death cross’ soon—will a BTC bear market follow?

The KSM daily chart also revealed losses. The token declined by 11.5 percent in the same time frame and stood at $333. Moreover, Kusama faced a death cross between the 20-day exponential moving average (EMA-20) and the 50-day simple moving average (MA-50), a bearish predictor, unless the short-term moving average recovers above the long-term moving average.

A resistance trendline capped its bullish attempts twice in the last week. Should KSM manage another bullish move, it will have to retest the trendline and break above.

The collapse came as a surprise after the positive build-up around the launch of the parachain auctions on the Kusama Relay chain. DOT lost 7 percent in value after the Fed’s announcement on accelerated rate hikes. KSM followed suit, losing 11.5 percent in the same time frame.

DOT and KSM partially depend on the crypto market as a whole and Bitcoin as a leading cryptocurrency. The latter lost 6 percent since the Fed announcement, while DXY gained bullish momentum. The upcoming sessions will show if the crypto market can recover from the recent setback.