Polygon’s price appears poised to surge by at least 30% in the wake of a key upgrade on January 18 that would take a sizeable amount of its native MATIC token out of circulation.
Baptized as EIP-1559, the enhancement proposal originally surfaced as part of Ethereum’s so-called London upgrade on August 5. The proposal began to destroy, or “burn”, a part of the fees paid in Ether (ETH) to miners.
Traders and investors raised their bets on Ether before and after the EIP-1559 update, 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 the annual supply of Ether by 1.6 million ETH.
MATIC Seeks New All-Time Highs
Acting as a layer 2 protocol built to address Ethereum’s prevalent scalability issues, Polygon released a test implementation of EIP-1559 on December 14, 2021. Following the launch of the testnet, the price of MATIC shot up nearly 30% to $2.35, including a brief rally to its all-time high near $3.
In theory, lower supply in the face of rising demand would make the asset more valuable in the eyes of its offeror.
This classic economic benchmark has helped drive demand for cryptocurrencies like Bitcoin (BTC) before. Issuance would be halved every four years with a maximum supply capped at 21 million coins. This begs the question, could the price of MATIC rally in the same way? Mineplex co-founder Alexander Mamasidikov thinks so.
Mamasidikov told Cointelegraph that EIP-1559 would have a positive impact on the MATIC price, adding that it could easily rally towards its current high following the technical update.
“In periods of price recovery, investors are often looking for both technical and fundamental features to hold on to in support of a coin, and Polygon wields both,” he said, adding:
“While Polygon is still an improved version of Ethereum in terms of lower transaction costs, it is also the delight of retail investors regarding its low price at the moment compared to Ethereum or other smart contract networks.”
What do the technical aspects of Polygon say?
MATIC has been in an uptrend within an ascending channel pattern since July 2021, confirmed by at least two highs and two reactive lows.
The token recently retested the lower trend line of the channel around $1.89 as support, a move that was followed by a pullback to $2.50. It now acts as resistance and the $2.50 level also turned out to be close to the 1.00 Fibonacci line near $2.44.
That said, MATIC could try to break above the $2.44 resistance close to the EIP-1559 implementation on Jan. 18. The move would put the token on track to hit its intermediate upside target near $3, roughly a 30% jump.
Meanwhile, If the EIP-1559 factor drags on longer than anticipated, MATIC price might even attempt a prolonged rally towards the 1.618 Fibonacci line around $3.52. Conversely, a rejection at $2.44 could see Polygon retest the ascending channel support for a negative breakout.
Such a move could invalidate the bullish setup, as discussed above. All this coupled with MATIC being exposed to a correction to $1.77 or lower.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Each investment and commercial movement involves a risk, you must do your own research when making a decision.
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