Key Takeaways
Polygon surged 10.75% amid rising demand and bullish indicators, but profit-taking threatens its uptrend. If buyers hold momentum, POL could target $0.255; otherwise, a retrace to $0.207 looms.
Since hitting a local bottom of $0.19 five days ago, Polygon [POL] has traded within an ascending channel. Over this period, the altcoin has reached a regional high of $0.2369.
At the time writing, Polygon was trading around $0.2367, marking a 10.75% increase over the past 24 hours. Over the same period, the altcoin’s market cap jumped 9.63% to $2.48 billion, reflecting increased capital inflow.
But, is this the start of something big?
Polygon’s demand is recovering
Significantly, as the price started to recover, so did the altcoin’s demand, with buyers gradually returning to the market.
In fact, on 7th July, Polygon saw 16.55 million tokens in Buy Volume compared to 15.76 million in Sell Volume according to Coinalyze.
Source: Coinalyze
As a result, the altcoin recorded a positive Buy Sell Dela of 792.6K, a clear sign of aggressive spot accumulation.
Usually, when buyers overwhelm sellers, it results in upward pressure on the asset, leading to higher prices.
Derivatives demand is picking up too
Interestingly, when we examine the derivatives market, we determine that significant capital has flowed there as investors opened new positions.
According to CoinGlass, Polygon’s Open Interest (OI) jumped 13.22% to $118.76 million while volume rose 1.34% to $165.11 million.
Source: Coinglass
Typically, a surge in OI alongside Volume reflects growing capital inflow into the Futures market and increased participation. It seems this capital inflow mostly flowed into taking long positions.
As such, Polygon’s Long Short Ratio rose to 1.04 with longs accounting for 51% while shorts accounted for 48%.
Source: CoinGlass
Typically, a higher demand for long positions suggests that investors are actively betting on prices to rise further.
Profit takers pose a threat
Unsurprisingly, as the price jumped from the recent bottom, holders who have held underwater decided to cash out.
According to CoinGlass, Polygon’s Spot Netflow jumped into positive territory after dipping into negative territory the previous day.
Source: CoinGlass
As of this writing, the altcoin’s Netflow was $602k, indicating higher inflows relative to outflows. Usually, when Exchange inflow surpasses outflows, it suggests that sellers are more aggressive than buyers.
Historically, when traders on Exchanges turn to aggressive profit-taking, it results in higher pressure on the asset, leading to lower prices.
Can POL hold its recent gains?
According to AMBCrypto’s analysis, POL experienced a strong upswing as demand for the altcoin recovered.
As a result, the altcoin’s Relative Strength Index (RSI) made a bullish crossover, reaching 59, at press time.
Likewise, its Positive Index of Directional Movement Index (DMI) jumped to 26, signalling strengthening upward momentum.
Source: TradingView
When indicators are in this manner, they suggest buyers are in control and the current trend is likely to continue.
That said, if buyers maintain the pace and absorb rising sell pressure, Polygon will reclaim $0.24 and target the next significant resistance at $0.255.
However, the profit takers pose a substantial threat to the uptrend, and if buyers fail to absorb them, selling pressure will derail the uptrend. In such a scenario, POL will retrace to $0.207.
