Polygon (POL) Faces Bearish Pressure as Network Activity Declines – Price Analysis

Polygon (POL) Struggles Amid Bearish Trends – Can It Recover?

Polygon (POL) has been caught in a downward spiral, shedding 9% of its value over the past seven days. At press time, POL was trading at a crucial support level of $0.43, a threshold that, if breached, could trigger further declines.

The ongoing sell-off is primarily driven by rising selling pressure and a decline in network activity, both of which are restricting Polygon’s ability to recover. With key metrics indicating bearish sentiment, investors are left questioning whether a rebound is on the horizon.

Network Activity Plummets, NVT Ratio Spikes

Polygon’s Network Value to Transactions (NVT) ratio has surged from 27.66 to 86.44 in the past two days, signaling potential overvaluation due to decreasing blockchain usage. A high NVT ratio suggests that while the asset's valuation remains significant, its underlying utility is diminishing.

Dwindling dApp and DeFi Engagement

Further reinforcing this trend, data from DappRadar reveals that decentralized application (dApp) volumes on the Polygon network have slumped by 41% over the last 30 days, now sitting at $6.16 billion. Simultaneously, the number of Unique Active Wallets (UAWs) has fallen by 22%, totaling just 3.62 million.

The decentralized finance (DeFi) sector on Polygon is also experiencing a downturn. According to DeFiLlama, Polygon’s Total Value Locked (TVL) has dropped to a weekly low of $1.03 billion, reflecting a decline in user participation and capital inflow.

Additionally, the blockchain’s daily revenue has plummeted to just $6,860, further highlighting the decreasing economic activity within the network. If this trend persists, it could negatively impact POL’s price recovery efforts.

POL Price Analysis – Will Support Hold?

From a technical analysis perspective, Polygon’s price is trading within a descending triangle pattern, reinforcing the bearish outlook. The lower boundary of this formation aligns with the $0.43 support level, which POL was testing at the time of writing.

Key Technical Indicators:

• Bollinger Bands: The price is trending toward the lower band, indicating that bearish momentum remains strong and a potential breakdown toward $0.40 could be imminent.

• Money Flow Index (MFI): Currently sitting at 30, this indicator suggests that POL is nearing oversold conditions, which could prompt a short-term buying opportunity and a potential price reversal.

If Polygon manages to hold above the $0.43 support, a relief rally towards $0.46-$0.48 could materialize. However, if sellers maintain control, a drop to $0.40 or lower remains likely.

Market Sentiment – Derivatives Traders Exit Positions

Market confidence in Polygon remains shaky, as indicated by the declining Open Interest (OI) in derivatives trading.

Key Metrics from Coinalyze:

• Open Interest has dropped by $14 million in less than five days, now standing at $73.59 million.

• The decline in Open Interest suggests that traders are exiting their positions, reflecting a lack of conviction in POL’s short-term prospects.

• Historically, a drop in Open Interest during a downtrend reinforces bearish sentiment, potentially leading to further price declines or prolonged consolidation.

What’s Next for Polygon (POL)?

Given the weakening network activity, bearish technical setup, and declining Open Interest, POL remains vulnerable to further downside pressure. However, if oversold conditions lead to renewed buying interest, a short-term rebound could be on the table.

Key Levels to Watch:

• Support: $0.43 (critical level); if breached, watch for $0.40.

• Resistance: $0.46-$0.48; a breakout above this could shift momentum.

For investors and traders, caution is advised until signs of a sustainable recovery emerge. Monitoring network activity and volume trends will be crucial in assessing Polygon’s next move in the crypto market.

Srebrin Petrov publication: "Polygon (POL) Faces Bearish Pressure as Network Activity Declines – Price Analysis" was written for 24crypto.news

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