Is a Drop Below $0.50 Coming?

Polygon (MATIC) price has slid below $0.55, its lowest since July 2022, as investors switch attention to newer L2 networks. The on-chain analysis outlines key indicators that could push MATIC’s price deeper into the danger zone. 

Along with other market forces, regulatory disputes with the US SEC and the emergence of newer Layer-2 (L2) networks such as Optimism (OP), Arbitrum (ARB), and Base have significantly impacted Polygon network growth in 2023.

The team has responded by switching to a new CEO and touting migration to a new native “POL token” to replace MATIC. But, despite these sweeping moves, MATIC’s price has continued to slide deeper into the danger zone in 2023. 

Why is MATIC Price Going Down

The persistent decline in Polygon’s Network Growth is one of the key reasons MATIC’s price has been trending downward in H2 2023.  According to on-chain data culled from Glassnode, New Addresses registered on Polygon recently dropped to its lowest levels in two years. 

Evidently, so, Polygon only recorded 527 new addresses on August 20 before registering another 556 on August 22. Notably, the last time Polygon attracted anything less than 530 addresses was in February 2021. 

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Aggregating the number of new wallet addresses created daily, investors gain insights into how many new users are adopting the blockchain network. 

MATIC New Addresses sliding to 2-year lows signals that the Polygon Network Growth has plateaued in H2 2023. However, in contrast, alternative L2 networks like Optimsm, Arbitrum, and Base have been acquiring new users in recent months. 

This raises significant obsolescence risks, which could push the MATIC price deeper into the danger zone in the coming weeks. The MATIC community will likely demand faster execution of the Polygon 2.0 (POL) tokenomics, which is already underway. 

MATIC Holders are Still Prepping for More Sell Action

In further confirmation of the bearish outlook, MATIC holders seem to be preparing for more sell action in the coming days. As shown below, MATIC deposits into exchanges exceeded withdrawals by 8.41 million tokens on August 21. 

This is significant because the last time MATIC recorded Exchange Netflow higher than 8.4 million was on July 17, when it reached 23.42 million. And notably, it triggered a 15% MATIC price retracement by the end of the month. 

Exchange Netflows track real-time changes in the rate at which holders move their assets into crypto exchanges. As observed above, a spike in positive Netflows means that exchange deposits (typically for short-term trading) have outpaced HODLing withdrawals. 

Presumably, investors are moving their MATIC tokens into exchanges, anticipating further price drops. 

In summary, the MATIC price could continue decreasing for the following reasons. The Exchange Netflow spike could trigger increased selling pressure in the coming days.

Additionally, the decline in the Polygon network growth means MATIC could struggle to find new demand to absorb that selling pressure. 

MATIC Price Prediction: Freefall toward $0.50

The In/Out of Money Around Price data depicts the purchase price distribution of current investors on the Polygon network. It shows that MATIC’s 26% negative year-to-date performance has plunged 95% of current holders into losses. 

If this widespread dysphoria triggers a panic sell-off, MATIC’s price is in danger of a freefall toward $0.50. However, as shown below, 1,560 addresses had bought 2.35 million MATIC at the average price of $0.52.

They could offer considerable support by making last-ditch attempts to cover their positions. But, if those efforts fall flat, MATIC could trend deeper into the danger zone below $0.50. 

Although unlikely, a bullish momentum could sprout if Polygon (MATIC) price rebounds above $0.65. However, the 43,200 addresses had bought 64 million MATIC at the maximum price of $0.58 will pose significant resistance.

But if that resistance caves, then MATIC could reclaim $0.65.