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Polygon (MATIC) broke below $1 for the first time since January 2023. Sentiment encompassing the Polygon ecosystem has been bearish since the Ethereum Shappela update. What next movement is to be expected on the MATIC?
Polygon (MATIC): the loss of investor confidence
The Polygon blockchain has made a name for itself as an essential component of the Ethereum network. She established herself as solution de scaling to deal with the high gas fees and low throughput of Ethereum. Polygon also functions as an additional interoperability layer.
With the Shappela upgrade, the full transition to ETH2.0 Proof of Stake is complete, increasing Ethereum’s throughput and reducing its power consumption by 99%. Fears of practical obsolescence have gradually spread within the Polygon ecosystem. Will the project team be able to rekindle investor confidence and trigger a price rebound? What are the levels to follow on the price of the MATIC?
According to some on-chain data, investors seem to be losing faith in the Polygon network since the end of the ETH 2.0 transition. The chart below nicely illustrates the phenomenon and shows how weighted sentiment began to move below zero shortly after the completion of the Shapella upgrade on April 12th. Between April 12 and May 1, the MATIC’s weighted sentiment fell 148%, from 0.92 to -0.45.
Weighted sentiment measures the market’s perception of a project by comparing the ratio of positive reviews to negative reviews. When a project’s weighted sentiment remains negative for long periods of time, it is an indicator that investors are becoming less interested in the long-term viability of the project.
Unless the team Polygon launches new incentives or a new product to rekindle investor interest, this trend may have a long-term negative impact on MATIC prices.
Despite falling prices, MATIC still looks overvalued
The increase in ratio NTV (network value to trading volume) suggests increasing downside pressure on MATIC price. The NTV ratio compares the value of a network to its current adoption rate and transaction traction.
The chart below shows how the MATIC has lost fundamental traction since April 12th. Between April 11 and May 1, MATIC’s NVT ratio exploded by + 630%dropping from 41.28 to 298.74.
The NVT ratio therefore compares the value of a cryptocurrency (its market capitalization) to the transaction volume of its blockchain. It is used to assess the level of adoption and activity of a network.
The higher the NVT ratio, the greater the capitalization of a crypto relative to its underlying trading volume. This is an indicator that the project is often overvalued. The 630% increase in the NVT ratio is therefore worrying for the Polygon blockchain and reinforces the downward trend already present in the price. MATIC may experience further price drops in the coming days and weeks.
Price prediction for MATIC: a drop towards $0.91?
MATIC Looks Ready to Break Below $0.95, Data Shows In/Out of Money Around Price (IOMAP) offered by IntoTheBlock. 6,000 addresses bought almost 170 million MATIC for a minimum price of $0.95, which would act as a barrier to the potential downside.
But if the bearish scenario is confirmed, the price of MATIC will probably drop to $0.91. MATIC will likely find a stronger level of support in this area (where 31,000 addresses hold over 630 million tokens).
This article does not represent investment advice in any way. The information provided here should not be used as the basis for making financial decisions. Investing in cryptocurrency involves risk and can lead to significant losses. You should only invest what you can afford to lose and do your own research before making any investment decisions.
Source : TradingView, IntoTheBlock, Saintly
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