The leading layer 2 scaling protocol on the Ethereum blockchain, Polygon (MATIC), has kept the rally alive for almost six weeks. Polygon price tagged highs of $1.258 for the first time since early November. At the time, the crypto market had just started to feel the pinch of the implosion of Sam Bankman-Fried’s FTX exchange.
With support coming into the picture at $0.752 in late December, bulls assumed the reins, which they intend to hold throughout 2023. MATIC exchanges hands at $1.208 at the time of writing, following a minor retreat from the weekly high ($0.258), possibly to collect more liquidity ahead of a potential weekend rally.
What’s Behind Polygon Price Rally
Polygon is one of the most recognized Layer 2 scaling solutions for Ethereum. It enables developers to bring up and deploy decentralized applications fast and seamlessly, without worrying about network congestion and high gas fees.
Since it’s built on top of the Ethereum blockchain, Polygon maintains the link using sidechains. Transactions on Polygon are processed off-chain, ensuring a higher throughput before being loaded to the primary chain later on. Polygon appeals to projects in decentralized finance (DeFi) and gaming platforms. Its popularity has grown exponentially over the years.
Institutional investors have recently been showing a lot of interest in Polygon mainly because of its scalability solutions bolstered by low transaction fees. The growing interest in Polygon and its related products could also be attributed to several strategic partnerships with key companies like Coinbase Custody and Chainlink.
Market conditions have also been favorable for Polygon price to rally, especially this week when the Federal Reserve in the United States took a disinflationary approach toward the economy. The Federal Open Market Committee (FOMC) may have sweetened the deal for investors by increasing interest rates by only 25 basis points below December’s 50 basis points.
MATIC Price Uptrend Is Not Stopping For Anything
The daily time frame chart shows how strong the MATIC price technical outlook is with the support of the Moving Average Convergence Divergence (MACD) indicator still holding onto a buy signal presented at the beginning of the year.
For traders looking for confirmation before buying MATIC, they must make sure the MACD line in blue holds above the signal line in blue. The momentum indicator should also keep moving in the same northbound direction.
MATICUSD daily chart
Some key levels to watch out for in a long-term bet on Polygon price uptrend is its ability to crack and hold above resistance at $1.30. This seller congestion has been significant since November when Polygon snapped out of an upswing staged from early October.
A recently presented golden cross pattern is also a factor to consider for the long-term bullish outlook in Polygon price. Successful traders use this pattern which comes into play when a short-term moving average flip above a longer-term one.
In the chart above, we can see the 50-day Exponential Moving Average (EMA) (in red) crossing above the 100-day EMA (in blue) before stretching to settle above the 200-day EMA (in purple). Although all golden cross patterns point at continuing, or an ongoing uptrend, the one formed with the 50-day EMA and the 200-day EMA has been known to carry a lot of weight.
Polygon can carry on with the uptick in price over the weekend, especially if bulls managed to weaken the resistance mentioned at $1.30. However, we cannot rule out certain eventualities such as a trend correction due to profit booking. Some investors may decide to lock in the gains if MATIC takes a long before blasting through $1.30.
On the downside, Polygon price appears to be sitting on top of a robust support area, as illustrated in the IOMAP model from IntoTheBlock. The on-chain analytics platform shines a light on 16.15k addresses that purchased 3.87 billion MATIC between $1.11 and $1.14.
Investors in that range are currently in the money, in other words, they are witnessing unrealized profit. Therefore, they would be willing to hold onto their profitable MATIC tokens while gazing toward a rally to the all-time high of $2.92 in the coming weeks, possibly months.
Polygon IOMAP chart
Polygon faces weaker resistance areas based on the same IOMAP model. Notice how the red circles shrink toward $1.40. This could mean that with a slight push from the bulls, Polygon price would quickly obliterate the seller congestion between $1.22 and $1.26 in favor of another spike first to $1.40 and later clear the path to the all-time high.
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