Volume Spread Analysis (VSA) on DOT/USDT Chart – Future Price Prediction & Market Sentiment
The DOT/USDT monthly chart (from Binance) provides a comprehensive view of long-term price action, showing major distribution, markdown, accumulation, and re-distribution phases. By applying Volume Spread Analysis (VSA), we can determine the dominant market forces, assess the strength or weakness in price movements, and predict future price direction.
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1. Market Cycle Breakdown (Applying VSA Principles)
Phase 1: Distribution (Late 2021 - Early 2022)
Price Action: DOT experienced a massive rally during 2021, peaking around $55.
Volume Analysis: The highest volume bars appeared near the peak, indicating smart money selling into strength (distribution phase).
Weakness Signs:
Large supply bars (high volume, wide spreads, weak closes).
Upthrust bars (sharp wicks on top, indicating rejection at higher levels).
Lack of follow-through on rallies, showing that demand was drying up.
📌 VSA Interpretation: Smart money was exiting positions while retail traders were still buying the hype. This was a clear sign of a coming markdown.
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Phase 2: Markdown (Mid 2022 - Late 2023)
Price Action: After distribution, DOT entered a sustained downtrend, falling from $50+ to nearly $4.
Volume Analysis:
High volume on down bars, confirming strong selling pressure.
No significant stopping volume, meaning institutions were not yet accumulating.
Each rally attempt was met with supply zones, indicating re-distribution.
📌 VSA Interpretation: This was a classic markdown phase, where institutions let prices drop while retail investors capitulated. No clear signs of accumulation were visible yet.
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Phase 3: Attempted Accumulation (2023 - Early 2024)
Price Action: A temporary bounce occurred around $4, reaching nearly $9 before failing.
Volume Analysis:
A few high-volume green candles, suggesting an initial attempt to absorb supply.
However, follow-through was weak, and price fell back below key resistance.
Recent candles show increasing red volume, suggesting renewed selling pressure.
📌 VSA Interpretation: While there was an attempt at accumulation, smart money did not fully commit. The price recovery failed, meaning supply still outweighs demand.
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2. Current Market Sentiment & Future Price Prediction
Based on VSA methodology, the DOT market is still in a bearish phase with no confirmed strength yet. Here’s what we expect:
1. Supply Still Present:
The recent down bars on high volume indicate more supply than demand.
No clear stopping volume or strength confirmation has appeared yet.
2. Price May Test Lower Levels ($3 - $4 Zone):
If selling pressure continues, DOT could revisit the previous lows around $3 - $4.
If a spring pattern (fake breakdown with absorption) occurs, it could signal a bottom.
3. Accumulation Signs to Watch For:
Climactic Volume: A final high-volume washout with strong buying reactions.
Narrow Spread Down Bars: Indicating supply is drying up.
Breakout Above Resistance ($7-$8): A strong close above this zone with increasing volume would signal strength.
4. Bullish Reversal Requires Demand Confirmation:
Demand must overcome supply with strong bullish candles and increasing volume.
If price moves above $8 with strength, we can expect a larger recovery.
📌 Final Prediction: DOT is still in a weak position and may test lower support before a true reversal. If accumulation signs appear, a long-term recovery could begin. Until then, expect continued weakness.
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3. Trading Strategy & Risk Management
For Traders:
Avoid buying blindly unless strong VSA signals (stopping volume, demand bars) appear.
Watch for reversals near $3 - $4 or a confirmed breakout above $8.
Shorting opportunities may exist if price fails at resistance ($6-$7).
For Long-Term Investors:
Accumulation should only begin if VSA confirms strength.
Look for higher lows and strong volume breakouts before committing.
Be prepared for a potential prolonged accumulation phase before any major recovery.
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Conclusion
Using Volume Spread Analysis, DOT is still showing supply dominance, and a new markdown could occur. The $3 - $4 region is key for testing demand, while $7 - $8 is the critical resistance for a bullish reversal. Until strong accumulation occurs, caution is advised for buyers.
