KSM crashes over 11% after the first parachain auction goes live on Kusama—what’s cooking?

New Delhi (CoinChapter.com) — The first parachain slot auction on the Kusama network started on Monday, after approval from its local council. Although a significant development for the network, their in-house token, KSM, fell 11.08%.

The fall was surprising as many developers were looking forward to participating in the much-anticipated parachain auction. In detail, parachains are branches of the Kusama/Polkadot relay chain that serves as private ledgers allotted to projects or developers. The parent chain, either Polkadot or Kusama, manages the security for the parachains while acting as a communication node between them.

What went wrong

Tuesday witnessed a market-wide price correction. Most of the top 35 cryptocurrencies (by market cap) crashed by 0.07% to 12%. The bearish correction followed an upward rally that began this weekend, which saw many cryptos new local highs or establish new support levels.

Kusama rose by 7.07% during the same upward rally, opening Saturday at $399 and reaching $427 by Sunday. However, as the market corrected, Kusama prices fell as well.

However, KSM has been trading above the 150-Day Moving Average (blue) line on the four-hour chart. The indicator plots the average price in a given time slot, which is 150 four-hour slots here. KSM prices are trading above the plot, indicating that the token is in an uptrend.

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The moving average lines also formed a golden cross on June 8. A golden cross occurs when a moving average line of a relatively short duration goes above the moving average plot of a longer duration. It forecasts a reversal of a downtrend.

Kusama prices had recovered by 129% from the May 19 crash by Sunday, going from a low of $202 to Sunday’s high of $464. Since then, the prices fell by 15%. At the time of writing, KSM was trading at $362.18.

MACD, a trend oscillator used in technical analysis, is neutral for KSM.

Will KSM recover

Kusama is offering 100 parachain slots in its auction, available for a 6-24 month lease. The auction began on Monday. The duration of the auction will be 45 hours, and the ending period will last for another 5 days. The end date for the auction is June 22, as of now.

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Developed to test new and experimental applications, Kusama has become a favorite among decentralized application developers. A reason for this is the interoperability offered by the network. Interoperability essentially means the ability to access information across different blockchain systems. Therefore, it is considered vital for the large-scale adoption of blockchain and DeFi systems.

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As the auction requires bidders to lock in a certain amount of KSM tokens, it will reduce the number of tokens in circulation. And if the demand for KSM increases, thanks to the bidding and the subsequent operation on Kusama parachains, a decrease in supply would increase its price.

Also, the launch of a VC fund by Master Ventures, especially for Polkadot and Kusama-based projects, will encourage investors and developers. The firm will fund the parachain bids, as well as directly fund promising projects.

Kusama’s fall in prices was part of a market correction. Thanks to the parachain auction and subsequent transaction of its native token, a bullish uptrend for KSM is just around the corner.

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