Polkadot price soars 37% after Coinbase Pro DOT listing, first parachain auction

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Polkadot’s DOT coin has witnessed massive upside moves recently as traders assess the cryptocurrency’s entry into the United States-based digital assets trading platform Coinbase Pro and the upcoming auctioning of parachain slots atop Polkadot’s testbed version of Kusama on June 15.

The DOT/USD exchange rate reached $26.44 on June 14, following a roughly 37% upside move that started on June 13. Nevertheless, entering the Asia-Pacific and European trading hours on June 15, the pair corrected by more than 4.5%, hitting an intraday low of $24.25.

Polkadot pulls back after testing technical resistance near $26.668. Source: TradingView

Initial upside moves in the DOT market surfaced in the wake of the Bitcoin (BTC) price rally on June 13. Billionaire investor Elon Musk commented that day that he would reinstate accepting Bitcoin payments for Tesla’s electric vehicles if the cryptocurrency’s new supply is mined using renewable energy.

The BTC/USD exchange rate jumped from as low as $34,780 to above $40,000 after Musk’s comments. Meanwhile, top altcoins — which heavily tail Bitcoin trends — followed suit, taking DOT prices higher as well.

Nevertheless, the scale at which Polkadot’s coin rose dwarfed the retracement rallies of most of its top crypto rivals. DOT’s heightened move uphill coincided with Coinbase Pro’s announcement that it was adding DOT-enabled trading instruments to its platform.

Kusama parachain auction

More bullish cues for traders came from startup Parallel Finance. The firm raised $2 million to bring its lending and staking features to the Polkadot and Kusama networks.

Kusama works as a sandbox for projects with aspirations to launch a parachain on Polkadot. Therefore, the testbed blockchain comes with real economic benefits and consequences, enabling other blockchains and apps to launch with forkless upgrades, governance structure and scalability.

That said, projects harness Kusama’s interparachain network to communicate with other apps having their separate parachains.

But to win a parachain slot, projects such as Parallel Finance must participate in a parachain auction. In doing so, they need to submit the bid amount (in DOT or KSM) alongside the slot duration (6 to 24 months). That effectively locks away DOT and KSM tokens for the duration of the slot, thereby reducing the tokens’ circulating supply.

Meanwhile, observers believe that DOT’s and KSM’s demand will keep rising based on the competitive auction process.

Projects that win a parachain auction will do a lot to provide value to their community and backers, according to Alex Siman, founder of Subsocial — a Polkadot-based decentralized social network.

“On the Polkadot parachain, the slots for projects to build on the chain is limited to 100, making the auction process notably competitive,” he explained. “A non-innovative project may not be able to win such auctions, and those who do will not want to waste the opportunity to go down in history.”

Related: Kraken launches Kusama parachain auction platform as KSM defies downtrend

The first parachain auction went live on the Kusama network around 11:00 UTC on June 15. KSM fell by 2.77% in the early European trading session.

On the other hand, Polkadot has yet to announce the auction of its parachain slots. Mira Christanto, a researcher at crypto data analytics firm Messari, noted that 65% of DOT’s active supply has already been staked since May. Only 30% of DOT now remains in circulation, and the upcoming parachain auctions will take more of those tokens out of supply.

“After the parachain launch, 40% of DOT could be bonded in parachains, hence reducing effective circulating supply to only 15%,” she added.