• MATIC price is traversing a multi-month rising wedge pattern on a daily time frame, hinting at a 56% crash.
  • Long-term on-chain metrics support the theory, while short-term metrics explain the recent upswing.
  • A breakdown of the wedge’s lower trend line at $1.76 can trigger a steep nosedive to $0.76.

MATIC price recovery after the December 4 flash crash has been impressive as the bulls are vying to retest the all-time high. Still, the sudden upswing could set the perfect stage for a bull trap. 

MATIC price and its rising on-chain activity

MATIC price experienced a 35% correction on December 4 as the crypto market slid into chaos. Polygon was able to recover 30% of its market value on the same day and has continued to advance further. 

While MATIC’s comeback has been remarkable, the price action today pushed the token past the December 3 swing high at $2.4. Such market behavior is indicative of an uptrend extension to retest the all-time high at $2.7.

MATIC/USDT 1-day chart

MATIC/USDT 1-day chart

The rising buying pressure coincides with an uptick in daily active addresses (DAA). 

The number of DAA on the Polygon network has increased from 4,892 on November 28 to hit a high of 7,406 as of December 6. The 51% increase in network activity suggests that investors are interested in MATIC price at the current levels and are actively interacting with the token.

MATIC DAA 

MATIC DAA 

An important spike in the number of large transactions on the Polygon network also adds credence to the optimistic outlook. 

Transactions with a value of $100,000 or greater have skyrocketed by a whopping 891%. More than 1,130 large MATIC transactions are taking place today compared to the 114 large transactions recorded on November 27. The uptrend on this on-chain metric can serve as a proxy to whales positioning themselves for higher prices. 

MATIC large transactions 

MATIC large transactions 

Reasons to be skeptical about Polygon 

Reason 1: The recent surge in the market value of Polygon is exciting, but investors need to note that the price action since June 20 has resulted in the formation of three higher highs and three higher lows. These points can be connected using trend lines to form a rising wedge. 

The technical setup forecasts a 56% correction to $0.76, obtained by adding the distance between the first swing high and low to the breakout point at $1.76. A lower low below the $1.5 support level will validate the bearish thesis and kick off a new downtrend.

For the pessimistic outlook to play out, MATIC price needs to get rejected by the rising wedge’s upper trend line where it currently trades. A breach of resistance level can lead to a retest of the all-time high at $2.7, which might serve to lure uninformed bulls and trap them. 

MATIC/USDT 1-day chart

MATIC/USDT 1-day chart

Reason 2: There are three price inefficiencies present below the current price levels and stretch down to $0.39, known as the Fair Value Gap (FVG). These gaps are often filled as market makers push prices down to these levels to collect liquidity.

FVG 3 is the nearest one and ranges from $1.4 to $1.24 and can be accessed after the $1.5 support floor is breached. The second FVG extends from $0.73 to $0.84, which also harbors the theoretical target of the rising wedge formation.

Reason 3: Adding a tailwind to the bearish thesis is Polygon’s 365-day Market Value to Realized Value (MVRV). This on-chain metric is used to determine the average profit/loss of those investors who purchased MATIC over the past year. A high number indicates that a majority of the holders are in profit and are likely to trigger a sell-off if they decide to forgo their investment. 

Polygon’s 365-day MVRV currently hovers around 134%. Interestingly enough, the last two times this on-chain metric surpassed the 140% level a steep price correction followed. Similar price action could result in a 40% retracement as it happened in early September and late October.   

MATIC 365-day MVRV chart

MATIC 365-day MVRV chart

Reason 4: MATIC is fast approaching price discovery or a path of least resistance, where it can swiftly move higher and set up new highs. However,  IntoTheBlock’s Global In/Out of the Money (GIOM) model shows that stable support levels are present at $2, $1.37, and $0.96, respectively.

The $0.96 is relatively the strongest level of support and harbors 30,870 addresses that purchased 2.31 billion MATIC. These addresses bought the token in a price range that extends from $0.78 to $1.07, where the theoretical target for the rising wedge is present. 

If a massive crash were to occur, sellers would quickly push past the $2 support wall and make their way down to $1.37, where 27,040 addresses purchased 946 million MATIC. Still, a stable support level is only present around the $0.96 level, and that is where investors can expect Polygon price to make a comeback.

As seen in the MATIC/USDT 1-day chart, the $1 psychological level is also vital from a technical perspective; together with the on-chain metrics, this level becomes a point of confluence. 

In the event of a Bitcoin crash, market participants can expect MATIC price to revisit the $1. Further selling pressure can result in a wick down to $0.76.

MATIC GIOM 

MATIC GIOM 

While the bearish outlook is tempting for the long-term holders to accumulate more tokens, it relies heavily on a potential crash for the pioneer cryptocurrency. If Bitcoin price decides to pull a 180 and continues to head higher, the bearish outlook for MATIC price becomes less likely.

Keeping the bull trap thesis in mind, a weekly close above the 100% Fibonacci extension level at roughly $3 will indicate a shift in the trend and invalidate the bearish thesis. If so, market participants can expect MATIC price to make its way to the next level at $4.46.

 

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Cryptos feed Join Telegram

Recommended content


Recommended Content

Editors’ Picks

Here’s the list of crypto exchanges that will support Terra’s LUNA hard fork

Here’s the list of crypto exchanges that will support Terra’s LUNA hard fork

Cryptocurrency exchanges are on board Terra’s LUNA hard fork and Do Kwon’s plan for the Terraform Labs token’s rebirth. Do Kwon has garnered support from leading cryptocurrency exchanges for the new Terra chain. 

More Terra News

Breaking: Ethereum breaks below $1,900 as selling pressure accelerates

Breaking: Ethereum breaks below $1,900 as selling pressure accelerates

Ethereum dipped below the $1,900 support level over the past few hours. A decisive close below such a vital demand zone will put ETH at risk of a 38% correction toward $1,200. 

More Ethereum News

A big price move is coming for Binance Coin; here’s what to look out for

A big price move is coming for Binance Coin; here’s what to look out for

A brief technical and on-chain analysis on Binance Coin price. Here, FXStreet's analysts evaluate where BNB could be heading next. 

More Binance Coin News

Top 3 Price Prediction Bitcoin, Ethereum, Ripple: Cryptos Ready - set - RALLY!

Top 3 Price Prediction Bitcoin, Ethereum, Ripple: Cryptos Ready - set - RALLY!

Bitcoin price, Ethereum and other cryptocurrencies are stabilising after the cryptocurrency space got slaughtered last week and two weeks ago.

More Bitcoin News

Bitcoin: The last rebound before capitulation

Bitcoin: The last rebound before capitulation

Bitcoin is showing bullish signs in the lower time frames, which can be taken advantage of by traders in the next couple of days. But looking at BTC from the higher time frames suggests that the bottom is not in yet.

Read full analysis

BTC

ETH

XRP