Over the past week, Polygon [POL] has experienced a downward trend, with a notable 9% decrease in its value. Currently, POL is trading at a critical support level of $0.43, and breaching this point may lead to additional downward pressure.
The decline in POL’s value can be attributed to an increase in selling activities, as well as a decrease in network usage which is hindering Polygon’s recovery efforts.
Observing the Rise in Polygon’s NVT Amidst Falling Network Activity
In the span of two days, Polygon’s Network Value to Transaction (NVT) ratio has surged from 27.66 to 86.44. This upward shift indicates a potential overvaluation of POL, driven by a decrease in blockchain transactions.
The surge in NVT suggests that despite the recent dip, POL may face further declines due to the lack of user activity necessary to stimulate price resurgence.
Data from DappRadar reveals a 41% drop in dApp volumes on the Polygon network over the past 30 days, totaling $6.16 billion, alongside a 22% decrease in Unique Active Wallets to 3.62 million.
Concerning decentralized finance (DeFi) activities, Polygon’s Total Value Locked (TVL) has hit a weekly low of $1.03 billion according to DeFiLlama. Daily revenues on the network have also fallen to $6,860, underscoring the impact of reduced network activity on POL’s recovery prospects.
Analyzing Polygon’s Price Trends
Amidst a descending triangle pattern, Polygon is displaying a bearish inclination, indicating a continuation of the downward trajectory. The lower trendline, currently at $0.43, is being tested by POL’s current value.
If the support level at $0.43 fails, Polygon’s price might plummet towards $0.40. The negative Bollinger Band Trend indicator signals bearish control, potentially triggering a further decline.
On the flip side, the Money Flow Index (MFI) at 30 hints at an oversold condition, presenting a potential buy signal for a bullish reversal.
Market Sentiment and Traders’ Conviction
Polygon’s Open Interest has dwindled by $14 million in less than five days, settling at $73.59 million according to Coinalyze. This shift reflects derivative traders’ exits from their positions due to uncertainty and wavering market sentiment.
A decline in open interest during a bearish trend not only indicates a lack of conviction but could also result in Polygon consolidating within the current trading range due to reduced volatility.