50% chance of descending MATIC (Polygon)

Polygon(MATIC) is down more than 40% from its record high of $2.92, set on Dec 27, 2021. But if a classic technical indicator is to be believed, it has more room to fall in the coming period.

Matic price chart plotting a classic bearish pattern

The recent MATIC reversal from bullish to bearish, followed by a bounce to the upside, has created what appears to be an inverted cup and handle pattern - a large crescent shape followed by a less severe bullish bounce, as shown in the chart below.

In an "ideal" scenario, the cup fittings and inverted handle set the stage for a future contraction. Price tends to fall towards levels equal to the maximum length of the distance between the top and bottom of the setup, when measured from the breakout level.

Therefore, if MATIC breaks out of the downtrend outside the “handle”, i.e. a decrease accompanied by an increase in volume, it could drop towards $0.86, almost 50% lower than its current prices, in the future.

bullish scenario

Polygon's extremely bearish outlook emerged amid a broader correction in the cryptocurrency market in 2022.

Polygon's market capitalization fell to $12.96 billion from $18.10 billion, with the MATIC price per token dropping more than 30% to $1,734 in the same period. However, the confluence of technical support kept the bullish hopes for the token alive.

In detail, two support levels in the shape of the MATIC 200-day exponential moving average (200-day exponential moving average; blue wave in the chart below) and the multi-month bullish sloping trendline (purple) helped MATIC limit its bearish bias.

It seems that the bullish correction will make MATIC retest an impending resistance level above in the form of a negative sloping trendline (black).

As a result, a bullish setup can appear only when a decisive recovery occurs, i.e. a rise in price combined with trading volumes.

If not, MATIC may risk validating the inverted cup and handle pattern above, which according to veteran analyst Tom Bulkowski, has a 62% success rate.

POWERFUL ON-CHAIN ​​DATA

MATIC operates 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 at a cheaper rate.

For this reason, Polygon's Daily Active Addresses (DAA) now average about 300,000 per day compared to 759 at the beginning of 2021, according to data provided by PolygonScan.com.

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