It’s alleviates congestion disorders in the crypto market. But when it comes to Polygon (CCC:MATIC-USD), is it the right Rx for your portfolio? Let’s examine what’s happening off and on the price chart, then offer a risk-adjusted determination aligned with those findings.
A vast and ubiquitous bear within a crypto market totaling some 9,000 coins and tokens (and growing) is unraveling Monday. Massive declines are headlined by flimsy safe haven losses of nearly 8% in 800-pound gorilla Bitcoin (CCC:BTC-USD) and roughly 11% for increasingly popular Ethereum (CCC:ETH-USD) and decentralized finance’s (DeFi) second largest digital asset.
Behind the fierce sell-off, regulators from the People’s Bank of China (PBOC) issued a statement solidifying a well-telegraphed bearish stance ordering the country’s major financial institutions to stop the trading, clearing and settlement of crypto transactions. And Polygon’s MATIC hasn’t proven immune to the punishing action.
Performance of MATIC
MATIC has shed a fairly routine, albeit volatile 9% in Monday’s session. But beyond the bearish insignia left by the PBOC, cryptocurrency’s 16th largest coin stands out as a winner in today’s digital market in more than one way.
Call it a quick and much-needed fix in today’s cryptocurrency market. In a nutshell, MATIC operates like an important scalability app for blockchain networks.
Specifically, Polygon’s layered technology is called a sidechain. It works in parallel with existing blockchains to reduce transactional congestion problems in a much faster and cost-effective way.
Importantly, this sidechain functionality includes an increasingly popular Ethereum platform. Ethereum’s tendrils reach 80% of the DeFi market. But is MATIC a prescription for today’s investors? It sounds as though it could be a buy. But in a disruptive and ever-evolving crypto market, what works today is no guarantee of survivorship.
Already a more robust Ethereum 2.0 (Eth2) is underway to resolve the network’s own shortcomings. If the platform successfully comes online and possibly as early as next year, where will that leave MATIC? It’s an important piece of a million-dollar or rather $8.161 billion dollar question embodied by Polygon’s valuation.
As much, it may be best to simply bow to MATIC’s price chart and a strategic purchase within a still wildly-speculative crypto market. This would be rather than maintaining certain knowledge of the last man standing and being proved unquestionably wrong.
Polygon MATIC Weekly Price Chart
Source: Charts by TradingView
Today, MATIC is showing its utility value within a grizzly bear market in cryptos. Despite Monday’s weakness the coin continues to demonstrate relative strength compared to other top digital assets. From BTC to ETH or Polkadot (CCC:DOT-USD), Litecoin (CCC:LTC-USD), XRP (CCC:XRP-USD) and Dogecoin (CCC:DOGE-USD), MATIC has them all beat when it comes to its technical wherewithal on the price chart.
Specifically and as the provided weekly chart of MATIC reveals, the coin remains in an inside consolidation pattern centered on its 50% Fibonacci level for a second-straight week. By comparison, Polygon’s peers are challenging the 62% and 76% levels or even failing those key supports.
With stochastics flattening in oversold territory, a conditional purchase aimed at timing an end to MATIC’s bear market looks approachable.
In conjunction with a bullish stochastics crossover, buying MATIC above $1.47 has the earmarks of a skewed trading opportunity. In total, the strategy would find shares critically back above the lifetime 50% level and midfield line of the past two weeks, while enjoying secondary price confirmation. It could be the start of a much larger profitable move for Polygon bulls.
For protection, 20 cents of managed downside exposure looks appropriate. That’s slightly beneath last week’s slightly bearish-looking doji candlestick, if support is violated (again) after a long position is initiated. And for that risk, if Polygon begins to rally, the opportunity to take profits in-between $2.50 to $3 later this year and without worrying about what might or might not be in 2022, looks approachable.
On the date of publication, Chris Tyler holds (either directly or indirectly) positions Grayscale Bitcoin and Ethereum Trusts (GBTC and ETHE). The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Chris Tyler is a former floor-based, derivatives market maker on the American and Pacific exchanges. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.