Why MATIC Might See Further Downside

    • A crash below $0.4 feels scary, but it may not be the end of the story for MATIC’s ongoing bear cycle.
    • On-chain data and technical indicators hint at a continued downside for MATIC.

    Polygon’s native token MATIC falling below $0.4 is worrying investors. But after narrowly holding above what looks like the last line of defense at $0.35, is the sell-off really over? According to technical indicators and on-chain data, it appears that the pain may not be over.

    Has MATIC Reached A Bottom Yet?

    MATIC has crashed over 86% from its December peak at $3 and the recent crash had seen it set a swing low at $0.36 on June 14. This downswing comprises five consecutive daily red candlesticks, indicating the sentiment in the market.

    While some altcoins such as TRON (TRX) have recovered by double-digits, MATIC was up only around 7% over the last 24 hours. However, recovery appeared difficult to sustain as the crypto was trading with a bearish bias at press time and faced stiff hurdles on the upside.

    If MATIC turns up from the current price, it would face a roadblock from the $0.40 level that was likely to absorb any selling pressure. This was validated by on-chain metrics from IntoTheBlock, whose In/Out of the Money Around Price (IOMAP) model reinforced the stiffness of the resistance at $0.40. According to the IOMAP chart below, this level is within the $0.394 to $0.401 price range where approximately 280.6 million MATIC tokens were previously bought by roughly 1,970 addresses.

    Any attempts to push the price above this level would be met by selling pressure from these investors who may wish to break even and minimize their losses.

    Polygon IOMAP Chart

    Source: IntoTheBlock

    The stakes are also high as more than two-thirds of the holders are underwater at the current price. The panic arising from increased downside may cause these investors to sell MATIC in an attempt to minimize their losses.

    Moreover, technical indicators support a further downside for the altcoin. The price is well below all the major simple moving averages (SMAs), which pose additional hurdles in its recovery journey. The downward movement of these moving averages and the down-sloping Relative Strength Index (RSI) indicated that the market favored the sellers. The price strength at 28 suggested that the bears were stronger than the buyers and were determined to push the price lower.   

    MATIC/USD Daily Chart

    TradingView Chart: MATIC/USD

    Furthermore, the Supertrend indicator’s position above the token affirmed the bears’ grip over the price. This index, like the moving averages, overlays the chart while tracking MATIC’s trend. It incorporates the average true range (ATR) in its calculations, which helps gauge market volatility. As long as the index is red and stays above the price, bears were likely to remain in an advantageous position.

    Therefore, increased selling pressure was likely to take MATIC below the $0.36 swing low towards the $0.35-level. A drop further would confirm a fresh downtrend as the altcoin records lower lows.

    There are, meanwhile, a few indicators pointing at MATIC’s recovery. However, if that happens, the price may move first toward $0.40 and later reclaim $0.50 to have a chance at recovery.

    Nancy Lubale
    Nancy is a cryptocurrency analyst and researcher. Her interests are in cryptoasset research, Fintech, Blockchain, DeFi, DAO and NFT sectors.

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