In the wake of a Jan. 18 upgrade, which would see a significant portion of its native MATIC token go out of circulation, polygon prices could rise by at least 30%
The improvement proposal, EIP-1559 was originally discovered as part of Ethereum’s so-called London Hard Fork upgrade. The proposal started “burning” a portion of the fees that miners had to pay via Ether (ETH).
Investors and traders raised their bids for Ether prior to and after EIP-1559, noting that Ether became a deflationary asset. Justin Drake, co-founder of Ethereum, claimed that EIP-1559 would decrease Ether’s annual supply to 1.6 million ETH.
MATIC seeks new records
Polygon, which is a layer-2 protocol designed to scale Ethereum’s prevailing scaling issues, launched a test implementation of EIP-1559 Dec. 14, 2021. MATIC price soared almost 30% to $2.35 after the test net launch. This includes a short run-up to near $3.
Chart of daily MATIC/USD prices. Source: TradingView
The theory is that a lower supply would make the asset less valuable than a rising demand.
This economic principle has helped to boost demand for cryptocurrencies such as Bitcoin (BTC). The supply limit of 21 million units would mean that the amount of issuable coins would be reduced by half every four years. The question is, can the MATIC price rise in the same manner? Alexander Mamasidikov, co-founder of Mineplex, believes so.
Mamasidikov stated to Cointelegraph that EIP-1559 will positively impact MATIC’s price, and that it could easily rise towards its record high after the technical upgrade.
Polygon adds that investors look for both fundamental and technical features when prices recover.
While Polygon is still a superior version of Ethereum in terms transaction costs, it is also a delight for retail investors due to its low price compared to Ethereum or other smart contracts networks.
What does Polygon’s technicals have to say?
MATIC has been trending upwards within an ascending channel structure since July 2021. This is confirmed by at least two reactive tops and two lows.
Recently, the token retested channel’s lower trendline at $1.89 support. This was followed by a bullish rebound towards $2.50. It is acting as resistance, and the $2.50 level turned out to be close to the 1.00 Fib line at $2.44.
MATIC/USD daily chart with ascending channel pattern. Source: TradingView
MATIC could attempt to break the $2.44 resistance around the EIP-1559 upgrades on Jan. 18. This would allow MATIC to set itself up for a test of its interim upside target at $3. That is about a 30% jump.
Related: NFT sales rise to new heights, Polygon network activity soars
If the EIP-1559 factor continues to play out, MATIC may attempt a prolonged run-up towards the 1.618 Fib level around $3.52. Polygon could reject the ascending channel support at $2.44 to prevent a negative breakout.
This would invalidate the bullish setup as previously discussed. This is all in conjunction with MATIC being exposed to a correction towards $1.77 or below.
com. You should do your research before making any investment or trading decision.