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Polygon zkEVM Comeback Lifts MATIC Price Over $1 – Is the Downtrend Done?

Last Updated March 26, 2024 3:03 PM
Valdrin Tahiri
Last Updated March 26, 2024 3:03 PM
By Valdrin Tahiri
Verified by Peter Henn

Key Takeaways

  • After an outage over the weekend, Polygon’s zkEVM came back online on Monday.
  • The MATIC price increased above $1 shortly after the announcement went public.
  • Will the bounce mark the local low for MATIC, or is there another drop in store?

Polygon’s zkEVM  is a zero-knowledge scaling solution that is compatible with the Ethereum Virtual Machine (EVM). It uses zero-knowledge proofs, meaning that it can prove a transaction is valid without revealing any information about it and combines it with EVM’s ability to write smart contracts.

Amid MATIC’s underwhelming performance over the past 12 months, investors and traders are eagerly anticipating any positive developments that could act as a catalyst for a price rally toward $1.50.

Polygon zkEVM Comes Back Online

On March 23, the Polygon zkEVM halted block production for ten hours. This was the first such outage since its launch  one year prior. Yesterday, Polygon announced  that the mainnet is back online.

However, due to the activation of the emergency state, there is a 10-day timelock for any further updates to the system. The team promised a full report on the main causes of the issue sometime next week.

VP of Product for Polygon Labs David Silverman  praised the team for the swift handling of the issue. He noted that even though zk-rollups are difficult, they are inevitable.

Zk-rollups process transactions on a faster blockchain and then transfer it back to the parent blockchain at a much lower price, verifying them through zero-knowledge proofs.

So, users benefit from the speed of the smaller blockchain and the security of the bigger one. They are usually employed in a layer 2 solution, the most prominent being Polygon and Arbitrum.

The MATIC price increased to above $1 shortly after the announcement.

MATIC Price Prediction: Is the Correction Over?

The daily time frame technical analysis shows the MATIC price has traded inside an ascending parallel channel since October 2023. More recently, the channel’s resistance trend line rejected the price on March 13. This led to a six day decrease that culminated with a low of $0.91.

MATIC bounced afterward and increased above $1 yesterday. However, it still trades at the channel’s midline, which can determine if the trend is bullish or bearish.

MATIC Price Increases Above $1
MATIC/USDT Daily Chart | Credit: TradingView

Just like the price action, the RSI and MACD both give neutral readings. The RSI is at 50 while the MACD is at 0, signs of an undetermined trend.

So, whether MATIC closes above the channel’s midline can determine if an increase to the resistance trend line occurs, or a drop to the support trend line happens instead.

On-chain data for Polygon does not offer encouragement. While transaction fees for Ethereum layer-2s were greatly reduced after the Dencun upgrade, the effect was the weakest for Polygon, which has not yet fully implemented  blobs for Dencun.

Number of Polygon Transactions
Polygon Transactions | Credit: IntoTheBlock

This has possibly contributed to the relatively low number of 3,400 weekly transactions, well below the 16,900 all-time high transactions in May 2021. The Total Value Locked (TVL) fares even worse, since the current reading of $1.19 billion  is more than seven times below the all-time high of $9.24 billion, and the revenue  of $30,000 is well below the all-time high of $236,000.

MATIC Faces Uncertain Future

Due to the lackluster on-chain activity and price performance, the MATIC price trend is unclear. Rather, the reaction to the long-term channel’s midline will be key in determining if the next movement is bullish or bearish.

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