In recent days, Polygon (MATIC), the native token powering the leading Layer 2 (L2) platform, has faced a significant downturn, shedding 10% of its value over the past week. As MATIC hovers near the lower boundary of a horizontal channel, concerns arise about a potential further decline if critical support at $0.63 is breached.

MATIC Bears Eyeing Break Below Key Support

Currently trading at $0.63, its lowest level since October 2023, MATIC has been confined within a horizontal channel since April 13, fluctuating between resistance at $0.75 and support at $0.64. This consolidation pattern typically emerges when buying and selling pressures balance, restraining the asset’s price movement.

However, MATIC’s recent descent toward the lower boundary of this channel suggests a surge in bearish sentiment, corroborated by its negative weighted sentiment of -0.64. This metric, which gauges overall sentiment based on mentions and volume, reflects a predominance of negative sentiment surrounding the asset.

Declining Futures Open Interest Adds to Bearish Outlook

Further exacerbating concerns is the decline in MATIC’s futures open interest, dropping by 8% to $197 million since the start of June. A diminishing open interest indicates that more traders are closing positions without initiating new ones, signaling a lack of confidence in future price appreciation.

Price Prediction: Bulls Under Pressure to Defend Support

Key momentum indicators for MATIC paint a bearish picture, with the Relative Strength Index (RSI) at 36.44 and the Money Flow Index (MFI) at 26.11. These readings indicate oversold conditions, suggesting weakening buying pressure and potential further downside.

If bearish momentum persists, MATIC could breach support at $0.64, potentially plummeting to $0.61. However, a successful defense of this support level coupled with a shift in sentiment could see MATIC rallying to $0.67 and aiming for the upper boundary of the horizontal channel.

Market Sentiment and External Factors

The bearish sentiment surrounding MATIC is not occurring in isolation but is part of broader market dynamics impacting the cryptocurrency space. Concerns over regulatory uncertainty, environmental criticisms of proof-of-work cryptocurrencies like Bitcoin, and macroeconomic factors such as inflation fears and interest rate hikes by central banks all contribute to the prevailing cautious sentiment among investors.

Moreover, the recent crackdown on cryptocurrency mining in China, which led to a significant exodus of miners and disruption in hash rate, has added to the uncertainty in the market. As a Layer 2 scaling solution built on top of Ethereum, MATIC’s performance is intricately linked to the broader Ethereum ecosystem, making it susceptible to fluctuations in Ethereum’s price and network activity.

Technical Analysis and Price Forecast

From a technical analysis standpoint, MATIC’s current price level at $0.63 represents a critical juncture for the cryptocurrency. If the support level at $0.63 holds, there is a possibility of a short-term rebound, with potential resistance levels at $0.64 and $0.67. However, failure to hold this support could lead to further downside, with the next major support level likely around $0.61.

Conclusion

As Polygon (MATIC) navigates precarious support levels amidst bearish sentiment, investors and traders remain on edge, closely monitoring price movements and sentiment indicators for clues about its future trajectory. With market uncertainty prevailing, the coming days will be pivotal for MATIC as it grapples with the prospect of further decline or a potential bullish reversal.