- Polygon prices fell over 27% in two days before recovering on Tuesday.
- MATIC fell despite Polygon’s recent acquisition of Mir and deployement of bun mechanism on Mumbai testnet.
NEW DELHI (CoinChapter.com) — Ethereum scaling solution Polygon (MATIC) seems to be recovering after falling more than 12% on Dec 13, as prices failed to react to Polygon’s Mir acquisition. After the Mir acquisition announcement, Polygon tried to start an uptrend, but the price action was weak, and the bull run never began.
However, Polygon announced today that it had deployed an upgrade on the Mumbai testnet that includes a burn mechanism based on Ethereum’s EIP-1559 upgrade. The EIP-1559 was part of Ethereum’s London hard fork and introduced a burning mechanism for ETH.
As such, Polygon’s team deployed MATIC burning mechanism on its Mumbai testnet on Dec 14.
Moreover, the proposed update would introduce better fee visibility on the network. Polygon’s analysis indicates annualized burn would constitute 0.27% of the total MATIC supply. Burning would increase deflationary pressure on MATIC, theoretically driving prices upwards.
On Dec 9, Polygon announced the acquisition of Mir Protocol, a start-up that the platform claims has developed the world’s fastest ZK scaling technology. The move aligns with Polygon’s plans to expand its scaling solutions. Mir would help develop the Polygon Zero project, an Ethereum compatible ZK Rollup.
Zero-knowledge (ZK) proofs allow external validators to verify encrypted transactions without handing over sensitive private information. They are useful in complex DeFi applications that handle users’ private data, such as names, addresses, credit card details, etc.
Polygon has been actively exploring ZK-based Ethereum scaling solutions. The blockchain platform’s recent announcement also shared its plans to commit $1 billion for its ZK cryptography-related efforts.
Polygon Price Charts
MATIC prices reacted to the burn mechanism introduction. On a day that saw quite a tussle between bulls and bears, the bulls managed to hold out to register a win late in the day.
MATIC followed its Monday decline with a jump of 12.1% to reach a high of $1.94 before prices pared. However, Polygon would still need to move and consolidate above immediate resistance at $1.98, near its 26-day EMA trendline, for the uptrend to continue.
Meanwhile, the $1.75 resistance managed to arrest MATIC’s fall, indicating buyer action is strong near the price level. As such, a continued uptrend could see Polygon recover Monday’s losses as it moves above to challenge resistance at $2.12.
MATIC also has support coming from its 100-day MA line and the ascending trendline of the parallel channel near the $1.6 price level. However, if the token breaks below the channel support, a selling spree might pull prices down to $1.5 before MATIC can recover.
The relative strength index is currently neutral for the Polygon token, clocking 48.63 on the daily charts.
On the other hand, trend-based momentum oscillator MACD charted a bearish crossover for Polygon on Dec 13. A bearish crossover occurs when the MACD line (difference between 12-day and 26-day EMA) moves below the MACD signal line (9-day EMA of MACD).
As a result, the MACD histogram painted negative, expanding bars. Expanding histogram bars indicate the bearish momentum is strong for MATIC. Though, a sustained uptrend could see momentum turning bullish fairly quickly.
At the time of writing, MATIC was trading at $1.9, up 5.8% on the day.