These indicators indicate that Polygon (POL) may have hit bottom

Polygon (MATIC), currently known as POL, is one of the worst-performing coins in the top 100 since the beginning of the year, having dropped more than 62%. However, some important indicators on Wednesday suggest that its price may have bottomed out.

POL is at a crucial threshold, could potentially form a bottom

After reaching a yearly high of $1.29 on March 13, POL has dropped by over 70%. While some cryptocurrencies still have positive returns for the year despite the recent market downturn, POL has dropped by 26% over the past year. This poor performance has left 96% of investors holding this token in a loss-making situation.

Currently, POL is trading within the key price range of $0.36-$0.39, where investors have purchased over 7 billion POL tokens, according to data from IntoTheBlock. Due to the high demand around this price level, investors may strongly defend, leading to the potential formation of a bottom.

Global In/Out of the Money index of POL | Source: IntoTheBlock

The Market Value to Realized Value (MVRV) ratio of POL, measuring the average profit or loss of token holders over a specific period, also paints a similar picture. The 30-day, 60-day, 90-day, 180-day, and 365-day MVRV ratios are all below 0, indicating that investors buying POL during the corresponding periods are all experiencing losses, according to data from Santiment. Notably, the 365-day MVRV ratio, at 96.9%, suggests the potential for a bottom formation.

MVRV index of POL | Source: Santiment

Another important metric is the Total Value Locked (TVL) of Polygon, which has remained stable at around $800 million to $900 million over the past year, according to data from DefiLlama. This indicates no new interest from DeFi in the Polygon blockchain network.

POL can increase to $0.58

The open interest (OI) of Polygon (POL) has dropped to its lowest level in three years, at $27 million, a 93% decrease from the record high of $438.8 million in February, according to data from Coinglass. Open interest refers to the total number of outstanding contracts in the derivatives market. The low OI indicates that investors are still cautious about POL. The open interest needs to grow to support any potential price rally.

On the daily chart, POL is trading at its lowest level in two years at $0.377 and inside an important rectangle. Prior to reaching this low in early September, this price level was last seen in June 2022, following a downtrend due to the collapse of LUNA/UST.

POL/USDT daily chart | Source: TradingView

On the downside, POL can find support around $0.36. On the upside, POL can rise to the rectangle resistance level of $0.58 if it surpasses the 50-day and 200-day Simple Moving Averages (SMA). Another step up to the rectangle resistance level of about $0.58 could trigger a strong rally.

The relative strength index (RSI) and the Awesome Oscillator (AO) momentum indicator are currently just below the neutral levels of 50 and 0, indicating a slight downward trend.

Closing the daily candle below $0.36 will invalidate this point, causing more selling pressure.

You can check the price of POL here.

Disclaimer: The article is for informational purposes only and is not investment advice. Investors should do their own research before making a decision. We are not responsible for your investment decisions

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According to Fxstreet