This rebound came a day after the token fell more than 17% to $0.787, its lowest level since July 2021, amidst a global market crash fueled by the US’s Federal Reserve’s hawkish policies.
MATIC price rebounded after five days of constant declines, attracting buyers around the same support level that was then followed by a 275% bull run last year.
Following a previous retest of the $0.787-level in July 2021 and the 0.786 Fib line (near $0.61) of the Fibonacci retracement graph — drawn from the $0.002-swing low to the 2.86-swing high — MATIC rose to a record high of $3 by December 2021.
Thus, it is reasonable to expect that MATIC/USD will see a sharp increase in the coming weeks.
However, between July 2021 and May 2022, there have been a lot of changes in terms of market fundamentals, which may alter the behaviour of MATIC traders.
For example, MATIC experienced a price surge last year as demand for layer-2 solutions skyrocketed in response to Ethereum’s soaring gas and transaction prices.
Many notable decentralised financial apps, such as SushiSwap decentralised exchange, liquidity service Curve, and lending platform Aave, have taken advantage of this opportunity to expand their operations in the Polygon blockchain.
The total value locked inside Polygon liquidity pools. Source: Defi Llama
However, 2022 has not been a great year for crypto. Following the Fed’s decision to raise interest rates and unwind its $9 trillion balance sheet, investors have reduced their exposure to riskier assets. Unfortunately, the prospect of excess cash exiting the market has harmed MATIC, whose year-to-date paper returns were nearly 65% below zero as of May 10.
“This is a risk-off across all asset classes, including crypto,” Daniel Ives, strategist at Wedbush Securities, told the Financial Times, adding that digital asset investors have “nowhere to hide.” He continued:
“Some investors are playing crypto like a hedge against inflation, but it’s trading like the Nasdaq’s Siamese twin.”
Polygon CEO Ryan Watt announced on May 9 that the company is collaborating with Meta to develop a nonfungible token (NFT) platform for Facebook and Instagram.
Meta CEO Mark Zuckerberg also confirmed that the company has been “testing digital collectibles for creators and collectors to showcase NFTs on Instagram,” and that similar features will soon be available on Facebook. The hype may aid MATIC in establishing a strong price floor.
Facebook is choosing Polygon due to:
🌍 Our carbon-neutral footprint
⛓️ The scale we can offer
— Ryan Wyatt (@Fwiz) May 9, 2022
However, from a technical standpoint, MATIC risks a bearish continuation towards $0.615 in May.
A bullish confirmation appears less likely until the coin reclaims its 50-week exponential moving average (50-week EMA; the red wave) near $1.37 as support.