Polkadot's DOT token fell 1.68% over the past 24 hours to $4.43, as negative momentum continued to grip the multi-chain network. DOT has now dropped 10.93% in the past week and 18.04% in the past month as part of a broader risk-off move impacting crypto assets. With Polkadot's market cap now standing at $5.37 billion, let's dig into the critical data points and indicators that traders should watch.

DOT saw $77.78 million in 24-hour trading volume, suggesting waning interest as prices consolidate. In the past hour, DOT treaded water with a slight 0.02% decline, unable to stage even a short-term recovery. Expanding the view shows DOT sunk 18.04% in the past month with sellers remaining in control of price action.

Polkadot's market cap of $5.37 billion represents a significant drop from its 2021 high above $40 billion. Its decline in market standing indicates traders have rotated away from DOT amid a cooldown in hype for interoperability-focused layer 1 blockchains.

Drilling down further, DOT has plunged 38.39% over the past 6 months, dramatically underperforming Bitcoin and the broader altcoin market. DOT has suffered from speculators exiting risky positions as market conditions deteriorated in 2022. Ongoing hacks and outages on Polkadot-based DeFi platforms have also eroded confidence.

Based on this data, I expect further downside for DOT in the near-term as technicals remain weak. DOT recently dropped below its 200-day moving average, a bearish indicator that often leads to sustained selling pressure. Continued declines toward the $3.50 and $2.50 support levels look likely.

Bulls want to see a sharp bounce off the $4 zone and recovery back above the 200-day MA at $5. This would indicate a potential washout bottom. A relief rally up to $5.50 remains possible. However, DOT needs a close above the $6–$7 supply zone to signal an interim bottom is in place.

Until issues around security and network outages are addressed, DOT may continue underperforming the market. The Polkadot team must refocus on stability and user experience to restore faith. With fear peaking, a short-term bounce is likely, but major upside seems unlikely until macro conditions shift. Monitor the $4 support level in the near-term for signs of strength.

Is Polkadot a Good Buy After Dropping 40%?

With Polkadot's DOT token down almost 40% from its highs, bargain hunters may be wondering if now is the opportune time to pick some up on sale. However, while DOT offers intriguing technology, the recent breakdown in price action suggests caution is warranted. More downside could be in the cards before a durable bottom forms.

Although Polkadot aims to be a next-generation blockchain ecosystem, it has yet to gain significant developer traction or user activity. Repeated network disruptions and hacks have also raised doubts about the network's stability and security. Until these foundational issues are resolved, DOT remains vulnerable.

Additionally, DOT's high correlation to Bitcoin implies it will likely follow BTC's macro trend. With Bitcoin charting a series of lower highs and lows, further downside looks probable unless Bitcoin can reverse its own bearish structure. This pressures DOT as well.

Nonetheless, once the macro backdrop stabilizes, DOT's discounted valuation and exciting development roadmap could make it an alluring opportunity. But prudent investors may want to wait for evidence of a bottom before going long, rather than trying to call the exact bottom.

What's Next for Polkadot if DOT Breaks Below $3?

Polkadot's native token DOT looks vulnerable to a breakdown below the key psychological support at $3 if the current bearish momentum continues. If the DOT price slices below this critical level, what are the next key support levels that could come into play?

The most immediate downside target would be the $2 level. DOT briefly spiked below $2 during the depths of the 2022 bear market, so this marks a fresh 2022 low. If $3 fails to hold, a retest of $2 looks very likely, as traders who bought the dip would cut their losses.

Below $2, the next meaningful support zone for DOT is seen between $1.20 and $1.50. This area provided both resistance and support through 2020 and 2021, so the level is expected to be closely watched. A drop into this zone would mark a macro bottom retest for DOT.

However, if selling pressure overwhelms buyers, DOT could see a capitulation wick toward the $1.00 level. This is DOT's all-time low set in 2020, so the odds of breaching this is low. But in a panic, anything is possible, so traders must be prepared.

To avoid retesting these lower levels, DOT bulls need to make a strong defense of the $3 level and quickly regain ground back above $4. If DOT can stabilize in the $4-5 zone, that would help take downside targets off the table. With DOT oversold on larger timeframes, a relief bounce could happen soon. But the long-term outlook remains bearish without significant technical progress.