Polkadot (DOT) is a blockchain projection designed to interconnect sub-chains called parallel chains or parachains. Each application-specific chain built within Polkadot uses the Substrate modular framework, and this is meant to ease the development process.

The project has been at the center of developers' and investors' attention for well-nigh of 2022, but the sharp market-wide correction on May xix dealt a heavy accident to the DOT toll, and the team has been relatively repose for the by two months.

On July 22, Karura Bandy, the outset decentralized substitution (DEX) in the Polkadot ecosystem, was launched. The project was created by Acala, a decentralized finance (DeFi) projection backed past Coinbase Ventures.

Polkadot (DOT) performance in USD at Coinbase. Source: TradingView

In the by 24 days, DOT rallied by 100% to reclaim the $20 support, even though the price is even so 58% beneath the $50 high. Presently, investors seem unsure of the direction afterwards the $22 level served as resistance.

What'south the difference between Polkadot and Kusama?

Polkadot refers to the entire ecosystem of parachains that plug into a single base of operations platform known as the relay chain. This baselayer provides security to the network and handles the consensus, certitude and voting logic.

On the other hand, Kusama is an early and unrefined release of Polkadot that is designed to serve as a "canary" network to test governance, staking and sharding nether real economic conditions.

Therefore, fifty-fifty if the recently-launched Karura Bandy DEX is not running straight on the Polkadot blockchain, it proves its capabilities.

Derivatives data shed light on investor sentiment

Technical analysis charts may be projecting a bullish signal-of-view for DOT but what is the derivatives data saying?

For example, if the futures contracts premium is nonexistent, it means that investors are not comfortable creating long positions using leverage. A reduction of regular spot substitution volume shows little interest in the toll at electric current levels. This is particularly worrisome later on a rally like the one seen from DOT.

Polkadot (DOT) aggregated futures open interest. Source: Bybt

Assay of the open interest on futures contracts measures the notional currently in play. Instead of measuring how many trades per mean solar day, it only takes into account open positions.

Afterward peaking at $1.ii billion on April 17, this metric retraced to $340 million. Albeit much smaller, it currently holds the same levels seen in early Feb, when DOT was also trading at $20.

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Leverage use has been counterbalanced

Longs (buyers) and shorts (sellers) are matched at all times in futures contracts, simply their leverage varies. Eventual imbalances are caught past the funding rate indicator and derivatives exchanges will charge whichever side is using more leverage to balance their hazard.

Polkadot (DOT) perpetual funding charge per unit. Source: Coinalyze.net

Equally shown above, from mid-July to Aug. ane, the funding charge per unit was mostly negative, indicating that shorts were the ones enervating more leverage. A negative 0.05% rate every 8-hours is equivalent to 1% per week. Nevertheless, the state of affairs reversed over the past ii weeks after the indicator ranged betwixt 0% and 0.04%, a level which is unremarkably deemed neutral.

The open involvement and funding rate evidence no sign of bullishness from a derivatives trading perspective. There are besides no signs of excessive leverage or excitement later on the recent rally, which is likewise positive.

With both indicators currently presenting a neutral stance, DOT's performance will probable depend on its ecosystem evolution.

The views and opinions expressed here are solely those of the writer and do not necessarily reverberate the views of Cointelegraph. Every investment and trading move involves take chances. You should conduct your own research when making a determination.