Polkadot’s Q4 data shows growth in user activity, can DOT sustain this trend?

• Polkadot’s address activity registers an uptick as market conditions improve.
• DOT demand hangs in the balance as the market seeks more directional clarity.

Polkadot is off to a healthy start so far this year in terms of its operations, as is the case for most top blockchain networks. However, we cannot truly have a clear understanding of what to expect without a reference point. A recent Messari report revealed the state of Polkadot in Q4 2022.

Read about Polkadot [DOT] price prediction 2023-2024

According to the Messari report, Polkadot’s daily active accounts grew by 64% in Q4 22 while new accounts grew by 49% during the same period.

This is noteworthy because the market reached its bottom range during the same quarter, which was characterized by the FTX black swan event.

10/ @Polkadot Q4 22' from @NickDGarcia

+Daily active accounts and new accounts increased by 64% and 49%, respectively
+XCM has transmitted over 166K transfers across 70 channels
+Treasury funded 571K $DOT through the Eth-to-Polkadot Snowbridge

? https://t.co/Xh2PVxPhYf pic.twitter.com/gun1NXein6

— Messari (@MessariCrypto) February 10, 2023

It is easy to assume that Polkadot user activity may grow at a higher pace in Q1 2023, based on the data from the Messari report.

The market recovery may encourage more user growth but that may not necessarily be the case. The same report reveals that Polkadot’s user growth may have mostly been fueled by users migrating from FTX.

Nevertheless, a strong recovery in Q1 might also contribute to support stronger user activity and growth. This strong user growth reflects the robust spike in active social users in December. A precursor to the volume surge that manifested in early January.

The strong address activity did make significant contributions to the demand for DOT as observed in January.

Can DOT sustain the momentum?

DOT’s performance so far in February underscores a demand slowdown and significant sell pressure.

It retraced by roughly 13% to its $6.20 press time price, after investors got spoofed by FUD.

Source: Santiment

The amount of address activity and new address growth are correlated to DOT’s market performance to some extent.

This means that a bullish Q1 will likely encourage more investors to jump on board while the opposite outcome may lead to low address activity.

Is your portfolio green? Check out the Polkadot Profit Calculator

So what is the demand situation currently looking like? The last few days were characterized by lower demand, hence paving the way for a retracement.

Despite this, the bears have also demonstrated relative weakness, potentially paving the way for another bullish assault. The Binance and DYDX funding rates already indicate that demand is gradually recovering in the derivatives market.

The current market sentiment is also shifting gears. The weighted sentiment metric showed some upside in the last few days. This confirms that investors have shifted their expectations towards the positive side. It also reflects the bearish slowdown.

Source: Santiment

Notably, DOT’s price performance demonstrated some upside at the time of writing. This confirms the bullish expectations but the bears may still regain dominance if more FUD manifests down the road.