Polygon (MATIC) is down over 40% from its all-time high of $ 2.92 set on December 27, 2021. But if you believe the classic technical indicator, the coin has more opportunities to fall in the coming sessions.
Matic price chart showing a classic bearish pattern
The recent bullish-to-bearish MATIC reversal followed by a bounce to the upside created what looks like an inverted cup and handle pattern – a large crescent shape followed by a less sharp bullish bounce, as shown in the chart below.
Three-day MATIC / USD price chart with inverted cup and handle pattern. Source: Trading View
In the “ideal” scenario, cup fittings and an inverted handle set the stage for future shrinkage. At the same time, the price tends to fall to levels equal to the maximum length of the distance between the top and bottom of the setup, measured from the breakout level.
Therefore, if MATIC breaks out of the downtrend beyond the “handle”, ie a decline accompanied by an increase in volume, it may fall by around $ 0.86 in the future, which is almost 50% below the current price.
Bullish polygon scenario
Polygon’s extremely bearish outlook comes amid a broader correction in the 2022 cryptocurrency market.
Since the beginning of the year, Bitcoin (BTC) and Ether (ETH) tokens have fallen by about 11% and 22% of market value. Their fall also saw similar negative movements in other cryptocurrency markets, as its total value fell to $ 1878 trillion on February 11 from $ 2190 trillion earlier this year.
Polygon’s market capitalization fell to $ 12.96 billion from $ 18.10 billion, and MATIC’s price per token fell over 30% to $ 1,734 over the same period. However, the merger of technical support retained bullish hopes for the token.
In particular, two levels of support in the form of MATIC’s 200-day EMA (200-day EMA; wave in blue in the chart below) and the multi-month bullish sloping trend line (purple) helped MATIC narrow its bearish bias. .
Daily MATIC / USD chart showing key support levels. Source: Trading View
Polygon is once again testing the confluence of support for a possible price recovery in the future. However, it appears that the upside correction will force MATIC to test the impending resistance level again in the form of a negative sloping trend line (black).
As a result, a bullish setup can only occur when there is a decisive rise, ie a price increase in combination with trading volumes.
If not, MATIC may dare to test the inverted cup and handle model described above, which experienced analyst Tom Bulkowski says has a 62% success rate.
Strong chain data
MATIC acts as the currency of the Polygon ecosystem with initial use cases that include fees and storage. Users can choose Polygon for its ability to process Ethereum transactions faster and cheaper.
Related: Polygon raises $ 450 million in Sequoia-led funding round
For this reason, Polygon’s daily active addresses (DAA) average around 300,000 per day, up from 759 at the start of 2021, according to data provided by PolygonScan.com.
Polygon of daily active headers. Source: PolygonScan.com
Analysts at Panther Research saw DAA’s rise as bullish for MATIC, citing Ethereum as a reference as DAA’s rise correlates with ETH’s price rise.
Active Ethereum addresses. Source: glass node
Excerpts from their note:
“Given how close the adoption of the Ethereum and Polygon network is, and the fact that Polygon’s PoS side chain is set to surpass it in the future, and as more solutions roll out L1, it would be reasonable to expect the MATIC the token is set to create value “in the future”.