Polygon price loses final support despite strong on-chain metrics

Polygon price has been in a downward trend in the past few months as it continued to lose market share in the layer-2 industry. 

MATIC dropped to the key support at $0.4343 on Friday and has since pared back some of those gains. However, It remains around 60% below its highest point this year and 82% below its all-time high.

Competition in the layer-2 industry

Polygon, one of the pioneers in the layer-2 industry, has come under pressure in the past few years as the number of competitors has risen. 

Its total value locked (TVL) in the DeFi industry has dropped to $872 million from a record high of almost $10 billion. In MATIC terms, the TVL has dropped from a record high of 5.7 billion to 1.78 billion today.

Arbitrum, a leading layer-2 network has attracted 661 DeFi developers while its total value locked stands at over $3 billion. 

Polygon has also been passed by the likes of Base and Blast, which have $1.4 billion and $1.2 billion in assets, respectively. Optimism has also taken some market share from Polygon. 

This competition partially explains why the MATIC price has dropped by 82% from its all-time high.

Despite these challenges, Polygon has some encouraging on-chain metrics. For example, data shows that it has over 1.09 million addresses, making it the second-biggest chain after Tron, which has 2.09 million addresses. 

The other encouraging figure is that the number of transactions in the network have been stable. These daily transactions have remained over 3.8 million since March 11th this year. 

Also, the volume of stablecoins has been in a strong upward trend since October last year. As shown below, the volume has risen from 1.17 billion MATIC to over 1.8 billion on Tuesday. Stablecoins are important in a blockchain since they are used to handle most transactions.

Stablecoins in Polygon

Polygon also has a higher staking yield than most cryptocurrencies. It has a staking yield of 5.67%, compared to Ethereum’s 3.29% and Cardano’s 2.9%.

Polygon price has lost a key support

Polygon price chart

Despite these strengths, the Polygon price has dropped sharply in the past few weeks. It has also dropped below an important support level, potentially invalidating a double-bottom pattern that has been forming.

It dropped below the key support at $0.50, where it failed to drop below in June and October 2023. Unless this drop is a false breakdown, there is a likelihood that Polygon will continue falling and reach the next support at $0.3206, its lowest point in June 2022 and 37% below the current level.