Can Polygon Bounce Back as On-Chain Demand Dwindles? Understanding the POL Situation

The Polygon [POL] network experienced an increase in on-chain activity during the second week of January. According to AMBCrypto, this spike in activity was accompanied by a significant POL burn, attributed to record demand and a peak in daily transaction fees.

Key Takeaways

Polygon's POL network experienced a surge in activity and a record POL burn in early January.
There is currently a decline in on-chain activity and demand for POL.
Short-term holders have realized profits, while long-term holders show steady conviction.
The upcoming weeks may indicate whether further selling pressure arises.

Polygon Featured Image

However, the most recent metrics suggest that short-term holders were profiting from their investments. Given the longer-term price trends of POL, this situation implies potential profit-taking pressure could arise. The $0.18-$0.20 range has been identified as a possible supply zone, which has become evident. As of now, the Polygon token is priced at $0.1245, marking a 33.28% decrease from the $0.1866 high reached on January 10.

Decreased On-Chain Activity Indicates Lower Demand for POL

Polygon Santiment Activity Graph

The daily Active Addresses metric experienced a notable increase during the second week of January, coinciding with POL’s price surge. Since then, however, the number of active addresses has consistently decreased.

Additionally, Network Growth has declined over the last two weeks, and transaction counts have reverted to levels seen in December. This trend indicates that the earlier spike in on-chain activity may not be sustainable, shedding light on the reduced demand for POL.

Holder Behavior Shows Mixed Signals

Polygon Dormant Circulation Graph

During the POL rally earlier this month, the Mean Coin Age and the 90-day Dormant Circulation exhibited significant changes, suggesting that short-term holders capitalized on their profits. Conversely, the 1-year Dormant Circulation has remained stable, indicating that long-term holders maintain their convictions.

Since January 14, the Mean Coin Age has begun to trend upward, signaling a renewed accumulation across the network. Furthermore, there hasn't been a capitulation from short-term holders; the 90-day Dormant Circulation has remained relatively unchanged after its initial spike.

Traders and investors should monitor Dormant Circulation in the upcoming weeks as an indicator of potential selling pressure.

Though the slowing of on-chain activity raises concerns, a resurgence in both activity and demand for POL could trigger the next rally. For now, the $0.12 support level warrants attention from traders and investors.

Conclusion

In summary, while the Polygon network shows signs of reduced on-chain activity and demand, trends in holder behavior reveal differing signals among investors. Continued observation will be necessary to gauge future movements in the POL token's price.