Assessing if Polygon [MATIC] can hold on to its recent gains
The Polygon network just released a new major announcement related to the development of the network. The timing of this announcement also happens to come at an appropriate moment, considering MATIC’s strong upside so far this month.
The network announced the launch of its first EVM-compatible layer 2 scaling solution called zkEVM. This development has the potential to attract more users to the MATIC network because it will enable cheaper gas fees.
As a result, MATIC may experience higher demand, hence potentially contributing to the altcoin’s price rally.
Speaking of price, MATIC has delivered a spectacular recovery so far, after bottoming out at 0.31% on 18 June.
It was priced at $0.9163 on 20 July which represents quite a rally from its low levels in June. The bullish price action pushed the price above its 50-day moving average (MA) by more than 70%, while closing in on the 200-day MA.
MATIC bulls showed some weakness in the last 48 hours of 20 July. Bullish pressure has tapered out after the price pushed into the overbought zone according to the Relative Strength Index (RSI).
Slight outflows registered by the RSI are responsible for the bearish pressure. The current outlook suggests that MATIC is due for a bearish correction.
What goes up
The news about the new layer 2 scaling solution might be the reason why MATIC’s price action has avoided more downside in the last two days.
This announcement aligns with the strong network growth that the network has achieved since the start of July. The network is poised to leverage more growth courtesy of the latest development.
The network’s growth has been in tune with MATIC’s profitability in the last four weeks according to its MVRV ratio. The latter peaked at 65.54% on 18 July, indicating that many MATIC holders in the last 30 days are deep in profit.
The Polygon network’s increased growth in the DeFi landscape has also brought forth more demand for MATIC cryptocurrency outside of exchanges.
As a result, MATIC’s supply outside exchanges has been on a steady climb.
Although MATIC is enjoying healthy demand, its impressive price action is also pointing towards an increased probability of a reversal.
Its 30-day realized market cap recently peaked at 448.65 MATIC. This means the selling pressure is increasing and the price will have to yield to the bears sooner than later.