Navigating the Recent Decline: Exploring Critical Zones as Polygon Returns to January Levels

The Impact of Macroeconomic Headwinds

The crypto markets continue to face significant challenges due to macroeconomic headwinds. Among the hardest hit is Polygon (MATIC), which recently dropped to January levels, erasing most of its gains from Q1 2023.

Current Market Conditions

As of the time of writing, MATIC is trading at $0.8582, well below its Q1 2023 threshold support zone of $0.9172 – $0.9498. Bitcoin (BTC) is also struggling, currently below $27.5k. The downward pressure from BTC’s performance on lower timeframes could further impact MATIC.

Technical Analysis

Looking at the 4-hour chart, the Relative Strength Index (RSI) is in the oversold zone at a value of 24. This is an extremely bearish position. On the other hand, the On-Balance Volume (OBV) has shown fluctuations in the past two weeks, undermining a strong recovery.

Selling Pressure and Potential Support Levels

The breach of the support zone (cyan) has led to aggressive selling, pushing MATIC below $0.8712. If the bearish sentiment continues, sellers could further drive down MATIC to lower support levels at $0.8140 or $0.7514 in the coming hours or days.

Potential Rally and Resistance

Alternatively, there is a possibility of a rally if MATIC manages to close above the support zone, especially if BTC reclaims $28k and experiences a surge. However, the rally may encounter resistance near the recent high of $1.000 on 4 May.

MATIC Holder Analysis

MATIC’s 30-day Market Value to Realized Value (MVRV), which measures holders’ short-term profit/loss, currently stands at -13%. This indicates that MATIC monthly holders have experienced losses and suggests that the altcoin may be undervalued.

Negative Sentiment and Funding Rate

Sentiment has remained negative since mid-April, highlighting the advantage held by bears. Additionally, the funding rate is currently negative, further favoring sellers.

Potential Impact of BTC Reversal

If BTC reverses its recent losses, it could pull MATIC along with it and provide a respite for bulls.

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