MATIC price oversold for the first time in 11 months, making ready for short-term recovery

MATIC price continued its downtrend this week after losing the $1 mark, bringing the cryptocurrency to a four-month low. However, an important signal noted over the last 24 hours suggests that the altcoin may not be too far away from beginning a recovery.

MATIC price to drive up on the charts

MATIC price failed to follow Bitcoin and Ethereum’s lead as the Layer-2 blockchain token added another 12.7% decline this week to the already ongoing drawdown. Trading at $0.88, the altcoin is currently at a four-month low.

As the altcoin’s trading value declined over the last few weeks, MATIC price has reached a point where its potential for a bounce exceeds the probability of a further decline. The cryptocurrency’s Relative Strength Index (RSI) fell into the oversold zone below the 30.0 mark on the daily chart. The last time the indicator was at this point was back in June 2022, marking 11 months since the altcoin’s bearishness reached this zone.

MATIC/USD 1-day chart

Historically, this zone has been synonymous with recovery, which is visible on the charts as well. The last time the altcoin slipped into oversold territory, MATIC price ended up rallying by 75% in the span of four days. Although a similar rise is not expected in the current market conditions, some recovery is on the horizon.

This is also reflected in the investors’ behavior, who are more likely to hold on to their assets instead of selling at a loss. The Market Value to Realized Value (MVRV) ratio measures whether the token holders are underwater or in profit. 

In the case of MATIC, a dip below -10% suggests that most of the investors are facing profits and that rather than realize their losses, they might refrain from selling. This zone is also known as the opportunity zone, where recovery is bound to take place, as observed in past instances.

MATIC MVRV ratio

Furthermore, investor sentiment, another crucial trend-identifying factor, is moving away from greed thanks to the recent red candlesticks. However, the crypto fear and greed index shows that the overall sentiment is not negative yet. 

Crypto Fear and Greed Index

As long as investors lean into HODLing, the sentiment will remain neutral, which will be crucial for MATIC recovery going forward.