Ascending channel pattern sets Polygon (MATIC) up for a potential 30% rally

189
SHARES
1.5k
VIEWS


Polygon prices look set to increase by at least 30% following a key January 18th upgrade that would remove a considerable portion of its native MATIC token.

Dubbed EIP-1559, the improvement proposal was initially revealed as part of Ethereum’s so-called London Hard Fork upgrade on August 5. The proposal effectively began to destroy or “burn” some of the fees paid to miners via Ether (ETH).

Traders and investors increased their bids for Ether before and after the EIP-1559 upgrade, noting that it made Ether a deflationary asset for the first time in history. For example, a model created by Ethereum co-founder Justin Drake claimed that EIP-1559 would reduce Ether’s annual supply by 1.6 million ETH.

MATIC seeks new records

Polygon, which acts as a Layer 2 protocol designed to address current Ethereum scalability issues, deployed a test implementation of EIP-1559 on December 14, 2021. After the test network was launched, MATIC price rose nearly 30% to $2.35, which includes a brief surge to its all-time high of nearly $3.

MATIC/USD daily price chart. Source: Trading View

In theory, a lower supply in the face of rising demand would make the asset more valuable to its bidder.

This classic economic benchmark has already helped drive demand for cryptocurrencies like Bitcoin (BTC). The issue would be halved every four years against an offer cap limited to 21 million units. This begs the question, could the price of MATIC rise in the same way? Mineplex co-founder Alexander Mamasidikov thinks so.

Mamasidikov told Cointelegraph that EIP-1559 would have a positive impact on the price of MATIC, adding that it could easily reach its current high after the technical upgrade.

“During price rallies, investors are often looking for technical and fundamental characteristics to cling to in support of a coin, and Polygon wields both,” he said, adding:

“While Polygon remains a better version of Ethereum in terms of lower transaction costs, it is also making retail investors happy with its low price right now compared to Ethereum or other contract networks. smart.”

What do Polygon’s techniques say?

MATIC has been trending up inside an ascending channel pattern since July 2021, confirmed by at least two reactive highs and two reactive lows.

The token recently retested the lower channel trendline around $1.89 as support, a move that was followed by a bullish retracement towards $2.50. It is now acting as resistance and the $2.50 level was also found to be near the 1.00 Fib line near $2.44.

MATIC/USD daily price chart showing an ascending channel pattern. Source: Trading View

That being said, MATIC might attempt a break above the $2.44 resistance around the EIP-1559 upgrade on January 18th. The move would be on track to test its mid-upside target near $3, a jump of around 30%.

Related: Polygon Network Activity Rises as NFT Sales Hit New Highs

Meanwhile, if the EIP-1559 factor plays longer than expected, the MATIC price might even attempt an extended climb towards the 1.618 Fib line around $3.52. Conversely, a rejection at $2.44 could cause Polygon to retest the ascending channel support for a negative breakout.

Such a move would risk invalidating the bullish setup as shown above. This is all in conjunction with MATIC’s exposure to a correction towards $1.77 or lower.

The views and opinions expressed herein are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.