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Polygon’s Liquidity Strain: Can POL’s Support Hold as Selling Rises?
The ongoing bearish trend in the crypto market has taken a toll on several assets, including Polygon (POL). In the past day alone, the digital asset declined by 6%, further cementing its bearish path that has seen it drop 46% over the past year. As investors continue to dump their POL holdings, can the support levels hold as selling pressure rises?
To understand this situation better, let’s dive into the data and sentiment around the asset.
Liquidity Outflows: A Red Flag
Recent trends suggest that both on-chain and off-chain liquidity outflows have been consistent. According to Artemis, a staggering $105,900 worth of POL has been withdrawn from exchanges, indicating a significant shift in investor sentiment. Off-chain data also corroborates this notion, as spot exchanges witnessed the sale of approximately $263,000 worth of POL.
This liquidity strain is particularly concerning because it may lead to further downward pressure on the asset’s price. As more investors liquidate their positions, there will be increased supply entering the market, further driving down prices.
On-chain activity remains weak
Weak on-chain activity has been a recurring theme in the Polygon ecosystem. According to Artemis, weekly active addresses have seen a decline, dropping from 2.5 million to 2.2 million. This decrease in user engagement directly impacts price as less POL is being utilized, reducing demand.
Not only this, but even new users are showing little interest in acquiring the asset. As of writing, there were approximately 99,000 new users, which represents a significant drop from previous numbers.
The lack of enthusiasm from both existing and new investors highlights a grim outlook for Polygon’s prospects.
However, chart skews still suggest a potential rally
While sentiment remains weak and bearish, it is essential to recognize that POL has historically rebounded after hitting certain demand zones. Currently, the digital asset is hovering around 0.2264, which might trigger a short-term rally. This notion is supported by TradingView data.
However, there’s a catch. If this zone fails to hold due to continued selling pressure, it may signal the end of any potential rebound and lead to further declines.
Conclusion
The recent price action and market sentiment paints a grim picture for Polygon investors. The consistent outflow of liquidity, combined with weak on-chain activity, poses significant risks to the asset’s value. While chart skews do suggest there might be room for a minor rally in the short term, investors must remain cautious as the overall outlook remains bearish.
Will POL find its footing or is this merely a desperate attempt at reclaiming lost ground? Only time will tell.
Source: ambcrypto.com
