Polygon (MATIC) has a 50% reduced risk due to the formation of an inverted cup handle pattern

Polygon (MATIC) is down more than 40% from its record high of $2.92 set on December 27, 2021.

Reverse grip model

MATIC’s recent transition from bullish to bearish, followed by a rally within an ascending parallel channel, has led to the formation of an inverted cup, a bearish pattern.

In a “perfect” scenario, an inverted cup-handle setup sets the stage for an imminent recession. In doing so, the price tends to fall by an amount equal to the maximum distance between the top and bottom of the setup as measured from the breakout level.

Therefore, if MATIC completes the setup, it may drop to $0.86 in the future, almost 50% below the current price.

MATIC/USDT 3-day chart | Source: TradingView

Bullish scenario

Polygon’s extreme bearish outlook comes amid a broader crypto market correction in 2022.

Bitcoin (BTC) and Ether (ETH) are down nearly 11% and 22%, respectively, from their market valuations year-to-date. Its plunge also caused similar downsides for other altcoins, with the total market cap falling from $2,190 trillion earlier in the year to $1.878 trillion on Feb. 24.

Polygon’s market cap has also fallen from $18.10 billion to $12.96 billion, with the MATIC price falling more than 30% to $1,734 over the same period. However, the confluence of support levels has kept bullish hopes for the token alive.

In particular, the 200-day EMA (blue) and the uptrend line (purple) helped MATIC limit its downtrend.

MATIC/USDT daily chart | Source: TradingView

However, it needs to break above the resistance line formed from the all-time high to end the correction. Otherwise, the inverted grip plate model can be confirmed.

Powerful on-chain data

MATIC serves as the currency of the Polygon ecosystem with important use cases related to fees and staking. Users can opt for Polygon as it can process Ethereum transactions faster and cheaper.

Because of this, Polygon’s daily active addresses (DAAs) are currently averaging 300,000 per day, much higher than 759 at the start of 2021.

Polygon Daily Active Address (DAA) | Source: PolygonScan.com

Panther Research analysts see the rise in the DAA as a factor that will help MATIC continue to move higher going forward. This is because they benchmark against Ethereum, which has a rising DAA that correlates with a rise in ETH price.

Ethereum Daily Active Address (DAA) | Source: Glassnode

“Given that Ethereum and Polygon network adoption are closely linked, coupled with the fact that Polygon’s PoS sidechain is set to explode in the future and as more solutions are deployed by L1, it will be reasonable to predict that the MATIC price will move higher.”

Disclaimer: This article is for informational purposes only, not investment advice. Investors should research carefully before making a decision. We are not responsible for your investment decisions.

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