Polygon risks a 40% selloff amid $1.4B MATIC token release

YEREVAN (CoinChapter.com) – Polygon (MATIC) has lost 15% of its valuation since July 31 and traded at $0.85 on Aug. 2. Moreover, the bearish trend could continue based on unfavorable technicals.

MATIC in a Rising Wedge

The Polygon token formed a Rising Wedge setup, best visible on the four-hour chart. It occurs when the price action fluctuates between two rising trendlines that gradually lower the swing. The Wedge’s mid-range also proved significant, providing both support and resistance.

Additionally, the Rising Wedge is a reversal pattern. It takes the asset’s value slightly higher before taking it on another leg down, equal to the maximal distance between the Wedge’s trendlines.

Also read: Polygon (MATIC) Price Could Rally Above $1: Here's Why

Thus, if the Polygon token confirms the setup by breaking below the support, the target price would stand at $0.5, a 40% drop from the current value. The declining trading volumes supported the claim, showing the traders’ low expectations from MATIC returns.

Headwinds from vesting contract release

A researcher at financial digital channel Blockworks alerted their followers that $1.4 billion MATIC tokens were released from a vesting contract on Aug. 1.

In detail, a vesting contract holds aside a certain amount of tokens for some time for the team, partners, advisors, and others contributing to the project’s development. When the term of the contract expires, it releases the tokens back into the total supply.

Also read: Polygon (MATIC) pumps 20% after Disney collaboration announcement – will the rally last?

The Polygon team announced the vesting schedule and posted the distribution breakdown.

Will the token release hurt MATIC prices?

The token release could have alerted some users, as it could potentially lower the asset price by pumping the supply and harming the demand. However, the Blockworks researcher pointed out that he was “not bearish and wasn’t trying to imply that.”

They also provided further details on the token distribution, with the appropriate tracking links.

While the expert asserted the release wouldn’t hurt MATIC prices, some followers disagreed, saying it typically takes time for the effect to spread.