Newton Gitonga
Cryptocurrencies traded in red on Friday amid US-Iran nuclear tensions.
With volatility a defining feature in the maturing digital assets sector, protocols are contemplating how to position their treasuries.
In that context, the Polkadot community has introduced a forward-thinking proposal, planning to partially back the DOT ecosystem with Bitcoin.
Notably, they plan to convert 501,000 DOT tokens, worth approximately $1.9 million at the current market price, into tBTC (tokenized Bitcoin).
Polkadot forums discuss the proposal, which aims to strengthen the blockchain’s financial stability and hedge against future market uncertainty.
Why is the Polkadot community considering a Bitcoin reserve?
Despite cryptos’ inherent volatility, enthusiasts have widely recognized Bitcoin as a dependable store of wealth.
While Polkadot has DOT as its native token, key for ecosystem growth and governance, relying on one asset makes the treasury vulnerable to wild volatility.
Meanwhile, integrating BTC appears as a strategic move to instill trust in Polkadot’s financial stability and balance the treasury’s risk portfolio.
One of the strongest assets of the past decade, Bitcoin continues to perform. This is an opportunity for Polkadot to hedge against uncertainty while signaling to the broader industry that we do believe in and support a multi-chain future.
Managing risks via Hydration’s rolling DCA and Omnipool
The proposal highlights a risk-managed and structured way of adding Bitcoin into Polkadot’s ecosystem.
It involves converting native DOT into tokenized BTC through Hydration’s rolling dollar-cost averaging (DCA) feature.
Rather than a one-time purchase, the community seeks to gradually swap 501K DOT assets for tBTC over a year.
After the initial accumulation, the platform will supply 0.005 BTC to boost the Hydration Omnipool (a DeFi pool holding multiple assets) liquidity.
After a short accumulation period, chunks of 0.005 tBTC will be provided as liquidity into the Hydration Omnipool. This will allow diversification of the Polkadot treasury portfolio while also supporting ecosystem DeFi incentives.
The Bitcoin and Polkadot bridge will leverage Threshold Network’s non-custodial solution to ensure a secure, verifiable, and decentralized Bitcoin reserve.
DOT price outlook
The native coin hovers at $3.80 after losing over 6% in the past 24 hours.
While prevailing broad market declines explain DOT’s structure, the alt has struggled over the past sessions, down 25% on the monthly timeframe.
Polkadot holds a crucial support barrier at $3.60.
Marking this zone as the bear cycle’s bottom could herald a significant rebound and massive gain for loyal holders.
However, losing $3.60 could catalyze extended consolidations and price declines.
Broad market sentiments will determine DOT’s short-term trajectory.
Meanwhile, enthusiasts will watch how the proposed Bitcoin treasury might shape Polkadot’s ecosystem in the long term.
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