Polkadot (DOT), recognized for its innovative approach in the cryptocurrency universe, is currently facing significant challenges. After reaching a peak of $11.80 in March, the asset's price has suffered a considerable drop, recording a reduction of approximately 50%. Even with a recent update to the protocol aimed at enhancing its functionality and scalability, technical analyses suggest the possibility of an additional drop of 13% in the near future.

The Polkadot layer 0 blockchain experiences a decrease in demand during the month of July, with forecasts indicating that activity on its relay chain and parachains may reach minimum levels this year. This reduction in activity has resulted in a fluctuation of the DOT price within a narrow range, highlighting signs of increased selling pressure.

Despite the recent devaluation, which led DOT to a drop of 2.8% in the last 24 hours, reaching approximately $5.68, activity on the Polkadot network remains robust. The daily number of holders reached a new all-time high of 1.3 million, with the addition of 321 new users recently.

At the same time, there was an increase of 19.21% in daily active users, and the volume on the network reached an unprecedented level, according to data from Polkadot Subscan.

Coinalyze information reveals that open contracts are relatively low, showing only a slight increase of 0.12% in the last day. However, the Long/Short index is at 2.83, indicating that 73.86% of traders maintain an optimistic outlook, betting on a future appreciation. This suggests that, although the market is cautious at the moment, there is still potential for a recovery.

Gate, one of the leading cryptocurrency trading platforms, recorded a 23% increase in DOT trading volume in the last 24 hours. However, it is important to note that trading volume has shown a downward trend since July 5, when DOT reached its annual low. This decrease suggests that, while there is some trading activity, buying interest is not as strong, and the bullish sentiment remains moderate.

The price of Polkadot seems to be facing difficulties, despite the positive indicators on the network. However, investors remain confident in the long-term recovery prospects of DOT.

After the recent break below the critical support area of $6, the price of Polkadot triggered a significant long position liquidation event. This development is crucial for understanding possible future movements in the market.

A graphical analysis of the potential liquidation levels in the price movement of Polkadot provides insights into where smart capital may concentrate in the medium term. Currently, a significant amount of liquidity is observed near the $6 mark, likely composed of buy orders for aggressive short positions initiated close to this critical limit.

In the event of an upward correction, the $6 mark will become the main target for buyers looking to capitalize on liquidity and potentially complete a return to the previously broken support level.

It is important to emphasize that investing in cryptocurrencies involves significant risks and market volatility can result in substantial losses. Investors are advised to conduct their own research and consult financial experts before making investment decisions.