Polygon Faces Declining Active Addresses
Polygon is a prominent Layer 2 scaling solution for Ethereum, utilizing sidechains to achieve faster and more cost-efficient transactions. The current blockchain ecosystem is struggling to scale effectively to meet the needs of widespread adoption, with transactions often being slow and having limited throughput.
Unlike traditional blockchains, Polygon addresses these issues and aims to make decentralized finance (DeFi) more accessible to a broader audience. MATIC, the native utility token of Polygon, is used for staking, network governance, and transaction fees. However, the past few weeks have been challenging for MATIC, as the token has lost over 50% of its value since March 13, 2024.
The decline in MATIC’s price is linked to a steady decrease in demand over the past few weeks, further reflected by the negative trend in MATIC Network Growth since April 20. This metric tracks the number of new addresses created for trading MATIC, which has also been on the decline.
Bears Continue to Dominate Price Movement
The decreased market activity has led to a less liquid market, which in turn exerts bearish pressure on the price. Last week, addresses holding between 1 million and 10 million MATIC sold off more than 21 million MATIC. Since Polygon whales control a large portion of the supply, their buying or selling decisions can significantly impact the price. When whales accumulate MATIC, prices tend to rise, but when they sell, prices tend to fall.
Retail investors have also stepped back, contributing to the low transaction volume. The average transaction volume has decreased from $77 million to $21 million recently.
On a positive note, the U.S. Consumer Price Index (CPI) revealed a 3.4% decrease, which boosted sentiment in the cryptocurrency market. Bitcoin’s rise above $64,000 positively influenced MATIC as well, but traders should remain cautious as the risk of further declines is still present.
Some analysts speculate that Bitcoin could fall below $60,000 again, which historically leads to downward pressure on MATIC and other cryptocurrencies.
In the coming weeks, MATIC will likely be influenced by the overall cryptocurrency market dynamics, where positive developments can trigger significant price increases, but they also carry risks.
Technical Analysis for Polygon (MATIC)
Since March 13, 2024, MATIC has fallen from $1.29 to $0.59, with the current price at $0.67. The ongoing price decline is due to the consistent drop in demand over the last few weeks, and despite a brief jump, the bears continue to control the price movement.
MATIC may struggle to stay above the $0.65 level in the upcoming days. If it breaks below this level, the price could potentially drop to $0.60 again.
Key Support & Resistance Levels for Polygon (MATIC)
The chart below highlights important support and resistance levels from December 2023. MATIC has dropped from recent highs, but if it breaks above $0.80, it could face resistance at $1. The critical support level is $0.60; if the price falls below this, it would signal a “SELL” and the price could potentially drop to $0.50.
Factors Supporting a Rise in Polygon (MATIC) Price
Polygon (MATIC) has the potential to thrive, with its growing ecosystem and increasing adoption of decentralized finance (DeFi). Additionally, the recent CPI data has positively impacted market sentiment, lifting optimism for cryptocurrency markets, including MATIC.
If investor confidence continues to rise, there could be upside potential for MATIC. A move above $0.80 would help the bulls regain control over price movement.
Potential Triggers for Polygon (MATIC) Downturn
The decline in MATIC’s price can be caused by various factors such as negative market sentiment, regulatory changes, technological developments, and macroeconomic factors.
The drop in demand for MATIC over the past weeks is a major contributor, as well as the negative trend in MATIC Network Growth since April 20. If Bitcoin’s price falls again, it could further weaken MATIC’s price, as past trends show that Bitcoin’s price drops typically affect the broader cryptocurrency market negatively.
Expert Opinions on Polygon (MATIC)
The positive movement in the cryptocurrency market this Wednesday, with Bitcoin surpassing $64,000, positively impacted Polygon (MATIC) as well. This rally followed the release of CPI data, which showed a 3.4% year-on-year decline, improving market sentiment.
However, many analysts agree that MATIC’s ongoing price decline is due to the sustained drop in demand. Another issue is the negative trend in MATIC Network Growth since April 20. Additionally, some analysts believe Bitcoin could dip below $60,000 in the coming weeks, which would likely exert downward pressure on MATIC and the broader crypto market.
Disclaimer: Crypto trading is highly volatile and risky. Only invest what you can afford to lose. This content is for educational purposes and should not be considered as financial advice.
