Polygon (MATIC) has dropped 5% in the past week as Shapella Upgrade approaches. Bearish on-chain indicators suggest that MATIC’s price could retrace further. Can the $0.9 support hold firm?
Polygon (MATIC) Layer 2 (L2) blockchain was built primarily to resolve scalability problems on the Ethereum network. Since Ethereum unveiled a roadmap to migrate to Proof-of-Stake, crypto investors have grown increasingly wary of the long-term viability of the Polygon and other L2 networks.
Polygon developers have spent the last few months launching products that will see it complement Ethereum rather than compete. Recently, the launch of the ZkEVM drew a cryptic comment from Vitalik Buterin. The message read:
“A few million constraints for man, unconstrained scalability for mankind”
The message from Buterin gave the nod to the Polygon team’s efforts to pivot toward providing critical auxiliary cross-chain infrastructure for Ethereum 2.0 and other blockchain networks.
However, despite these positive media reports, on-chain data reveals that crypto investors appear to be taking short-term bearish positions. Could popularity this week be focused predominantly on Ethereum with the upcoming upgrade?
MATIC Whales Are Taking a Cautious Stance
MATIC whales appear to be taking a cautious approach as the Shapella upgrade draws near. According to the blockchain data analytics firm, Santiment, large transactions involving MATIC have dwindled by 50% in the past week.
The chart below shows how Whale transactions worth 100,000 and above dropped from 129 a week ago, to 65 transactions as of April 11.
The Whale Transaction Count is a metric that sums up the number of daily transactions worth $100,000 and above. Decreasing values of whale transactions typically imply that large investors are taking a restrained stance and avoiding making large bets.
A closer look at the chart depicts how MATIC price action has been closely correlated to the number of Whale transactions. If the whales remain out of action, MATIC could experience more downside.
Similarly, on-chain data reveals that DeFi investors also appear to be taking bearish positions on MATIC in recent weeks.
According to Glassnode, MATIC tokens locked in smart contracts have reduced considerably in recent weeks.
The following diagram illustrates how DeFi protocol users have unstaked approximately 70.16 million MATIC (0.71% of circulating supply) between March 7 and April 12.
When network participants stake tokens in a smart contract, they are essentially locking up their assets as collateral to participate in a particular project or earn rewards. If investors begin to persistently unstake their tokens, it indicates bearish sentiment surrounding the project. Users could be looking to offload their assets when withdrawing coins from DeFi platforms.
The market value of the unstaked tokens is approximately $76.4 million. If the DeFi investors pile on sell-pressure In a bid to avoid impermanent loss, it could see MATIC’s price drop further in the coming weeks.
MATIC Price Prediction: $0.90 Can Offer Strong Support
As reported by IntoTheBlock, the teeming number of Polygon investors that would break even at the $0.90 zone could end the current bearish spiral.
The break-even point is the price at which the purchase cost equals the current market value of a digital asset. When an asset drops toward the break-even point, investors look to hold firm, or buy more of the cryptocurrency to keep their profitability status.
Conversely, investors may sell quickly to lock in some profit when the price rises toward a break-even point. This could inadvertently create a sell-wall and knock back the price.
As illustrated below, MATIC is likely to lose its current support at $0.95. However, 42,000 addresses holding 454 million coins are looking to prevent the drop at this price range.
Still, the Polygon network could break out of the bearish trend if the MATIC price breaks above $1.15. But profit-taking from 37,000 addresses that bought 431 million coins for a maximum of $1.15 could resist.
However, if MATIC can break the $1.15 resistance, it could rally toward $1.31. Here, another break-even cluster of 80,000 holding 430 million coins can cause a pullback.
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