Currently, Polygon [POL] finds itself in a challenging position, having experienced an 80% decline from its all-time high of $1.29. The crucial support level at $0.28 holds the key to determining whether Polygon will be able to initiate a comeback or face a potential downturn.
The Risk-Reward Scenario for Polygon
Following a significant surge post-election that pushed Polygon up beyond $0.70, the cryptocurrency has since been on a downturn, witnessing a 55% decrease. The overbought signals from the RSI indicated an inevitable profit-taking phase.
One of the main concerns lies in Polygon’s struggle to recover substantially due to the limited influx of fresh capital, resulting in an imbalance between supply and demand dynamics.
The notable drop in trading volume, plummeting from a peak of $1.7 billion to below $500 million, reflects a market sentiment favoring de-risking, exerting selling pressure on Polygon.
With Polygon already retracing more than half of its post-election gains, the question emerges whether investors are holding onto their positions in anticipation of future profits or opting to sell to break even.
The significance of the $0.50 level becomes apparent as nearly 57.8K addresses are currently experiencing losses at this point, holding a total of 8.39 billion coins. On the contrary, the $0.28 support level has proven its resilience by fueling a 60% recovery during the market upsurge in November.
An intriguing factor comes to light with a single whale-dominated wallet controlling a substantial 81% of Polygon’s entire network, holding a significant amount of 8.18 billion POL coins.
In the scenario where the support level fails to hold or investor interest weakens at resistance levels, Polygon faces the risk of a significant downturn, potentially erasing previous gains.
Evaluating the Possibilities
Polygon’s predicament is progressively evolving into a critical phase. The noticeable halving in network growth within a week indicates the adverse impact of limited fresh capital on POL’s performance. Should these metrics persist, the likelihood of a bullish breakout remains minimal.
The prospect of reclaiming the $0.70 threshold appears uncertain, particularly with formidable resistance levels keeping long-term holders cautious. The true litmus test lies at $0.50; a failure to sustain this level could pave the way for further downturns.
As whales potentially offload their holdings, trading volume shrinks, and market-wide volatility intensifies, the $0.28 support level emerges as the next probable destination in the near future.
However, if indications of opportunistic buying activity surface at this critical juncture, Polygon could witness a resurgence. Without such signs, the risk of entering an irreversible downward spiral remains a looming possibility. The clock is ticking.