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Polkadot Will Rebound as the Number of Parachains on Its Platform Grows

Polkadot (CCC:DOT-USD) is a $27.5 billion market cap cryptocurrency that is ranked as the tenth-largest, according to CoinMarketCap as of Jan. 17. But the good news is that parachains are now starting to launch their apps and use cases on its blockchain platform. That makes Polkadot worth much more over the long term.

the icon for the Polkadot (DOT) cryptocurrency

Source: Zeedign.com / Shutterstock.com

For example, Moonbeam (CCC:GLMR-USD) recently launched on the Polkadot platform on Jan. 11, according to a recent announcement by the network. Moonbeam, a fully Ethereum (CCC:ETH-USD)-compatible smart contract platform, won the second parachain auction on Polkadot and completed the launch process.

But overall, DOT has been in a funk lately. Since peaking on Nov. 4 at $55, the crypto fell to a low of about $23.62 on Dec. 20. That is a tumble of $31.38, or 57% in the space of just one and a half months. That’s a lot of volatility — probably too much. By Jan. 15, DOT was up a bit to $28.18.

Where Things Stand With Polkadot

previously wrote about the parachain auctions on the Polkadot network as well as their deflationary effect on the supply of DOT. Now, a large auction is complete and the mainnet on Polkadot will be leased out to winning parachains.

Recently, Polkadot was able to successfully auction five parachains on top of its blockchain network, each with its own focus. In addition, Polkadot plans to launch at least 80 parachains on its blockchain platform, according to CryptoPotato online magazine.

One of Moonbeams’ unique features is that it has also enabled balance transfers and Ethereum Virtual Machine (EVM) on its platform. The transfer feature will allow users to stake and start claiming rewards. This makes it a genuine decentralized finance (DeFi) app.

Polkadot acts as a “layer zero” blockchain code. Parachains operate on top of it in terms of the code they use. These parachains lease space on the Polkadot network for two years in order to have the ability to run on the blockchain.

According to Decrypt magazine, Polkadot’s parachain blockchain transactions don’t compete against all other smart contracts in the same ecosystem. It has room for 100 parachains, and allocations are made through auctions that will guarantee a slot for up to 96 weeks (i.e., almost 2 years.)

On Dec. 24., Polkadot tweeted that “Auctions 6-11 will take place over the next 12 weeks.” The tweet also said a auction would take place every two weeks, with 12 parachains taking part.

What to Do With DOT Now

It seems clear that DOT has probably come close to bottoming out. The more Polkadot releases new parachains on its blockchain network, the more attention the platform will get. That will also be good for the Polkadot token price.

Moreover, as the number of parachains on the Polkadot platform grows, and if its decentralized apps (dApps) gain popularity, the crypto’s reputation will improve. Additionally, its transactions could eventually be seen as faster and more efficient than other blockchain platforms. That will also help push up the price of DOT.

As a result, it seems the downturn DOT has taken is too much, too far and too fast. I suspect the market now realizes this. As a result, there could be a turnaround in Polkadot’s near future.

This will happen as the market begins to correct the excessive selling at the end of the year. I don’t think this means there is going to be a quick rebound in DOT. It could happen over a period of months rather than right away. But it will likely happen, especially since Polkadot will keep rolling out parachains on its platform that win in the various auction processes.

On the date of publication, Mark R. Hake did not hold any position (either directly or indirectly) in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Mark Hake writes about personal finance on mrhake.medium.com and runs the Total Yield Value Guide which you can review here.

Article printed from InvestorPlace Media, https://investorplace.com/2022/01/the-rise-of-polkadot-is-inevitable-as-more-parachains-launch-on-its-blockchain-platform/.

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