Polygons onchain metrics remain strong but final support for its price diminishes
The price of Polygon (MATIC) has been on a downward trajectory in recent months, experiencing a decline in market share within the layer-2 industry. MATIC fell to a critical support level of $0.4343 on Friday but has since regained some of those losses. Nevertheless, it remains significantly below its peak for the year by approximately 60% and 82% below its all-time high.
Competition within the layer-2 industry has intensified in recent years, putting pressure on Polygon, which was once a pioneer in the field. As a result, its total value locked (TVL) in the DeFi industry has plummeted from a record high of nearly $10 billion to $872 million. In terms of MATIC, the TVL has dropped from 5.7 billion to 1.78 billion.
Arbitrum, a prominent layer-2 network, has managed to attract 661 DeFi developers and currently holds a TVL of over $3 billion. Additionally, Polygon has been overtaken by Base and Blast, with $1.4 billion and $1.2 billion in assets, respectively. Optimism has also gained market share at the expense of Polygon. These factors contribute to the 82% decline in the MATIC price from its all-time high.
Despite these challenges, Polygon exhibits positive on-chain metrics. For instance, it boasts over 1.09 million addresses, making it the second-largest chain after Tron, which has 2.09 million addresses. Moreover, the network has maintained a stable number of daily transactions, exceeding 3.8 million since March 11th of this year.
Furthermore, the volume of stablecoins on Polygon has experienced a significant upward trend since October of last year. Starting from 1.17 billion MATIC, the volume has surged to over 1.8 billion as of Tuesday. Stablecoins play a crucial role in blockchain transactions, making this growth noteworthy.
Additionally, Polygon offers a higher staking yield compared to most cryptocurrencies. With a staking yield of 5.67%, it surpasses Ethereum’s 3.29% and Cardano’s 2.9%.
Despite these strengths, the price of Polygon has undergone a substantial decline in recent weeks. It has also dropped below a crucial support level, potentially invalidating a double-bottom pattern that had been forming. Falling below the key support at $0.50, which held firm in June and October 2023, may indicate a continued downward trajectory for Polygon, potentially reaching the next support at $0.3206. This would mark its lowest point since June 2022 and represent a 37% decline from the current level.
