Polygon's Liquidity Crisis and Price Resilience: Can Support Levels and On-Chain Fundamentals Spark a Bullish Reversal?

The cryptocurrency market has long been a theater of extremes, where technical indicators and on-chain fundamentals often clash in a tug-of-war between optimism and pessimism. For Polygon (MATIC), now rebranded as POL, the past year has been a case study in this duality. Despite a liquidity crisis that pushed its price to critical support levels, the token's underlying network activity and institutional validation suggest a potential for resilience. This article examines whether Polygon's on-chain health and strategic repositioning can catalyze a bullish reversal amid sustained selling pressure.

The Liquidity Crisis: A Test of Resilience

Polygon's price action in 2025 has been volatile, with MATIC trading near $0.35 in August—a level that, if broken, could trigger further downward momentum. The Relative Strength Index (RSI) has lingered in oversold territory (around 38), a classic signal that short-term selling pressure may be exhausting. However, the 50-day Simple Moving Average (SMA) remains a psychological hurdle, currently at $0.42, below which the token would face renewed bearish sentiment.

The liquidity crunch stems from broader market conditions, including macroeconomic uncertainty and a shift in investor focus toward AI-driven blockchain projects. Yet, Polygon's rebranding to POL and its migration to a new token standard—set to be fully supported by Coinbase on August 26—have introduced a critical variable. Institutional adoption, particularly from a platform as influential as Coinbase, often acts as a floor for price discovery in crypto markets.

On-Chain Fundamentals: A Hidden Engine of Growth

While the price chart tells a story of struggle, Polygon's on-chain metrics paint a different picture. Total Value Locked (TVL) on the network reached $4.12 billion in March 2025, a 93% increase year-over-year. DeFi protocols like Aave and QuickSwap dominate TVL, but the rise of gaming dApps (e.g., Planet IX) and liquid staking platforms (Stader, Lido) has diversified the ecosystem.

Transaction volume on Polygon's PoS chain averaged 8.4 million daily transactions in Q1 2025, with a peak of 10.3 million on February 16. The zkEVM layer, designed for scalability, processed 96 million transactions since its launch, with a 99.2% success rate. These figures underscore a network that is not only scaling Ethereum but also attracting users with low gas fees ($0.0063 vs. Ethereum's $1.72) and high throughput.

User growth is another bright spot. Unique wallet addresses surpassed 410 million by March 2025, with monthly active users (MAUs) hitting 18.9 million. Over 60% of these users also interact with Ethereum Layer 1, highlighting Polygon's role as a bridge between legacy and next-gen blockchain infrastructure.

The Bull Case: Catalysts for a Reversal

Three factors could drive a bullish reversal:
1. Institutional Validation: Coinbase's ticker migration to POL signals broader acceptance of Polygon's rebranding. This move could attract retail and institutional investors who view the token as a more credible long-term asset.
2. Protocol Upgrades: A major upgrade in August 2025 enhanced scalability and interoperability, enabling new partnerships and applications. These improvements are critical for sustaining TVL growth and attracting developers.
3. Oversold Conditions: The RSI at 38 suggests a potential rebound if the $0.35 support level holds. Historical data shows that tokens in oversold territory often experience short-term rallies when fundamentals remain strong.

The Bear Case: Risks to Consider

Skeptics argue that Polygon's fundamentals, while robust, may not offset macroeconomic headwinds. The token's price remains below its 50-day SMA, and the broader crypto market's correlation with equities (e.g., Nasdaq 100) means a downturn in traditional markets could spill over. Additionally, the transition to POL introduces uncertainty—will the rebranding confuse existing holders, or will it attract new ones?

Investment Implications

For investors, the key is to balance technical and fundamental analysis. If the $0.35 support level holds and the RSI rebounds, a short-term rally to $0.45–$0.50 is plausible. However, this scenario hinges on the success of the POL migration and sustained on-chain activity.

Long-term holders should focus on Polygon's role in Ethereum scaling. With 30% of Ethereum L2 transactions processed on Polygon and 190 dApps leveraging its CDK framework, the network's infrastructure is deeply embedded in the Ethereum ecosystem. This positions POL as a beneficiary of Ethereum's continued growth, even if its price remains volatile in the short term.

Conclusion: A Calculated Bet

Polygon's liquidity crisis is a test of its resilience, not its potential. The token's on-chain fundamentals—TVL, transaction volume, and user growth—suggest a network that is evolving beyond a mere scaling solution into a foundational layer of Web3. While the immediate price outlook is mixed, the convergence of institutional adoption, technical upgrades, and oversold conditions creates a compelling risk-reward profile.

Investors willing to navigate the volatility may find value in Polygon's journey, but patience and a clear stop-loss strategy are essential. As the crypto market matures, projects with strong fundamentals and clear use cases will outperform—Polygon, if it can hold its key support levels, may yet prove to be one of them.