Impact of Polygon’s AggLayer Launch on MATIC

Impact of Polygon's AggLayer Launch on MATIC

The Potential Impact of Polygon’s AggLayer Launch on MATIC

While Polygon Labs is gearing up to introduce the AggLayer feature, its influence on the native token, MATIC, may not be significant. Here’s why:

Price Analysis and Market Trends

MATIC is currently facing a potential slip to $0.68, regardless of the upcoming update. Despite an average profit of 31.85% for holders, it may not be the optimal time to go long.

Like many other cryptocurrencies, Polygon’s MATIC has witnessed a notable price decline in the last seven days. As of the latest update, MATIC is priced at $0.72, reflecting a 16.39% decrease over the past week.

Polygon’s AggLayer Launch

Despite the recent price action, Polygon Labs is moving forward with its plans. On January 24th, Polygon announced the upcoming launch of “AggLayer” scheduled for February. AggLayer aims to unify cross-chain liquidity within the ecosystem and is an integral part of Polygon 2.0.

However, the introduction of such developments does not always guarantee a positive impact on native tokens. It can lead to various outcomes, including positive reactions, drawdowns, or sideways movements.

Technical Analysis

From a technical perspective, MATIC faces the risk of further decline, as indicated by the Exponential Moving Average (EMA). Currently, MATIC is positioned below the 20 EMA (blue) and 50 EMA (yellow), with a bearish crossover. This suggests a potential drop below the $0.70 region in the short term.

The Relative Strength Index (RSI) at 42.50 indicates a lack of sufficient buyer presence to drive MATIC upwards. If market dominance continues for sellers, MATIC’s next movement might reach $0.70. The negative flip of the Moving Average Convergence Divergence (MACD) suggests the possibility of bullish momentum returning in MATIC’s favor, potentially retesting $0.75.

If the MACD reading does not improve, a drawdown to as low as $0.68 could be plausible.

Market Value to Realized Value (MVRV) Ratio

On-chain data from Santiment reveals that the Market Value to Realized Value (MVRV) ratio has increased to 31.85%. This ratio assesses the profit/loss of all circulating MATIC tokens, indicating an average profit for holders.

However, an elevated MVRV ratio may signal an overheated market, suggesting caution for opening long MATIC positions. Traders should monitor potential price decreases, as a corresponding drop in the MVRV ratio could present opportunities for spot trades or long positions.