Polkadot leads market rotation into legacy layer-1 tokens as Fed rate hike bets grow

While Bitcoin and Ether spent Tuesday treading water or drifting lower, a curious cohort of older layer-1 tokens quietly stole the show. Polkadot led the charge with gains between 7% and 20% in a single session, a move driven by a cocktail of short squeezes, spiking on-chain activity, and governance proposals that are actively reshaping its token economics. Traders are increasingly pricing in a Federal Reserve rate hike at the mid-September meeting, with the probability now sitting around 58% after August’s jobs report came in hotter than expected. What’s driving DOT’s breakout A derivatives short squeeze played a starring role, triggering over $610K in liquidations for DOT positions. When shorts get squeezed, forced buying amplifies upward momentum, and that’s exactly what happened here. On-chain activity surged in parallel. Daily network usage jumped by roughly 150%, tied to the launch of a new devnet that brought developers and users back to the ecosystem. Polkadot holders have been voting on several significant referenda that directly impact the token’s supply dynamics. Proposals #1909 and #1910 focused on adjusting staking parameters and validator incentives. Referendum 1926 d...