In the midst of a downturn in the overall cryptocurrency market, the performance of Polygon has been less than stellar.
However, on-chain data suggests that the MATIC rate may experience even more significant losses due to a lack of interest from retail investors.
Polygon network is not growing
The Polygon network is currently experiencing a stagnant growth phase. MATIC is the native token of Polygon, a popular second layer scaling solution for Ethereum. Its primary goal is to reduce transaction costs and speed up the process by using sidechains.
These sidechains operate independently of Ethereum but are still connected to the main network, enabling the transfer of decentralized applications to a system of connected blockchains.
Despite its success in solving Ethereum’s problems, the migration of Ethereum from Proof-of-Work to Proof-of-Stake could negatively affect the long-term prospects of Polygon.
Glassnode’s on-chain statistics reveal a steady decline in the number of new addresses created on the Polygon network since December 2022.
This downtrend has continued after the Ethereum developers announced the upcoming Shanghai update scheduled for April 12.
Although there was a slight increase in the daily rate of new addresses in early March, it started declining again on March 17, shortly after the update on the launch date for the Shanghai upgrade.
As of March 21, the rate of new addresses created daily on the Polygon network dropped by 32% from its local maximum of 1960 on February 17, down to 1318.
These trends suggest a waning interest in basic services and scenarios for using the network, which could make it difficult for the native token of the Polygon ecosystem to attract buyers.
Even the whales are feeling the effects of this decline. Addresses holding between 10 million and 100 million MATIC tokens sold or redistributed over 40 million coins over the past month, according to Santiment.
Their total cost was approximately $55.9 million. This group of large market participants has reduced their holdings of MATIC coins from 253 million to 211 million between February 22 and March 21.
Furthermore, buying and selling patterns made by whales have begun to show a high correlation with the dynamics of the MATIC price, indicating a growing concern among these investors.
Will MATIC fall below $1
IntoTheBlock has developed its own market depth model, which displays a visual representation of the current buy and sell orders for an asset at different price levels.
This tool provides valuable insights into the sentiment of market participants and can help traders assess and predict short-term market trends. By using the market depth model, traders can identify key support and resistance levels for an asset.
According to the model, the current bearish trend for Polygon may stall at around 5% below the current price level, specifically at the $1.03 area, where there is a cumulative demand of 3.5 billion MATIC.
However, if this support level fails, Polygon’s price could potentially fall to $0.90, where a significant buying wall of 1.2 billion MATIC is located.
On the other hand, if the price rises above $1.14, which is where 138 million tokens are listed for sale, this negative forecast may be invalidated. The next significant selling wall is located at $1.30, with a total of 1.35 billion MATIC listed for sale.
Overall, traders can use the market depth model to gain a better understanding of the current sentiment surrounding Polygon and make informed decisions about their trades based on these insights.