DOT Price Dips Below $5 as Market Awaits SEC Verdict on Polkadot ETFs

DOT, the native token of layer-0 blockchain Polkadot, has dropped below $5. This development comes days after Polkadot's price experienced a 30% increase

Key TakeawaysDOT, the native token of layer-0 blockchain Polkadot, has dropped below $5. This development comes days after Polkadot’s price experienced a 30% increase, driving it to its highest level since Feb. 2.Interestingly, the pullback also happened as the crypto market awaits a key regulatory decision: whether the U.S. Securities and Exchange Commission (SEC) will approve, delay, or reject pending applications for a Polkadot exchange-traded fund (ETF).The SEC verdict could impact DOT’s price action outside of the technical outlook. As the decision nears, here is what could be next for the altcoin.DOT Rally Eases After BreakoutAccording to the daily chart, Polkadot’s price surged to $5.30 after the cryptocurrency broke out of a falling wedge. The falling wedge is a bullish pattern characterized by two downward trendlines. The upper trendline represents resistance as the price hits lower highs. The lower trendline, on the other hand, shows lower lows, indicating support.Image: Polkadot price chart by TradingView

For DOT, the breakout happened as the trendlines narrowed and buying pressure increased, as shown by the Chaikin Money Flow (CMF). However, Polkadot’s price has since slipped to $4.82, due to the strong resistance near $5.30. The recent decline in the CMF reading indicates that accumulation is fading, contributing to the pullback. From this position, DOT’s price may continue to slide, with a risk of breaching the key support level at $4.45.Polkdot ETF Verdict Could Impact DOT PriceThe technical outlook for DOT is bearish as the cryptocurrency trades below the 200-day moving average. Moreover, the RSI has dropped below the neutral point, suggesting that there is more room for the bears to push the price lower.If the cryptocurrency continues to fall, it could find support at the 50-day moving average. A bounce from this level could set the stage for a rally towards the 200-day moving average.

If the SEC decides to approve the Polkadot ETF applications, it could have a significant impact on DOT’s price action.

The crypto's price is currently facing resistance at the 50% Fibonacci retracement level from the March 2022 low to the January 2023 high. If the ETF applications are approved, it could help to drive DOT’s price through this resistance level, opening the way for further gains.

However, if the SEC decides to delay or reject the applications, it could add to the downward pressure on DOT’s price.

This decision is becoming increasingly urgent as it is due very soon.

Earlier this year, asset manager Grayscale filed an application for a spot Polkadot ETF, with the SEC’s decision now expected on June 11.

Similarly, 21Shares is also applying for a Polkadot ETF, with the SEC’s verdict on this application anticipated by June 24.

Despite the pending applications and the broader market recovery, Paymon Mohsin, crypto derivatives market analyst at Capital.com, remains skeptical about the chances of approval for these ETFs.

"Despite the pending applications and the broader crypto market recovery in 2024, I wouldn't get our hopes up for an early approval. Chances are the SEC will prefer to delay the decision or reject the applications," he told Capital.com.

His skepticism stems from the SEC’s recent actions, which have seen the regulator postpone rulings on Solana (SOL) and Litecoin (LTC) ETF applications.

These applications were initially set to be decided by March 15 but have since been pushed back to June.

Moreover, Mohsin pointed out that the SEC has yet to approve any crypto ETFs, despite receiving numerous applications over the past few years.

The SEC has faced significant pressure to approve crypto ETFs, particularly after the agency approved the first iShares Short Treasury Bond ETF in 2007, kicking off a massive ETF boom.

Since then, the SEC has approved over 2,000 ETFs, but no crypto ETFs despite receiving the first Bitcoin ETF application in 2015.

As the SEC’s verdict on the Polkadot ETF applications draws near, it could have a notable impact on DOT’s price action.

If the applications are approved, it could lead to a surge in demand for DOT, which in turn could propel the crypto's price higher.

Conversely, if the SEC decides to delay or reject the applications, it could add to the downward pressure on DOT’s price.

From a technical analysis perspective, DOT’s price has pulled back from the recent breakout of the falling wedge, which had seen the cryptocurrency rally to $5.30.

The breakout occurred as the trendlines of the wedge converged and the Chaikin Money Flow (CMF) showed