Polygon Faces Technical Pressure as Layer-2 Competition Intensifies Following zkEVM Shutdown
Tony Kim Oct 22, 2025 05:47
MATIC price holds $0.38 amid sector-wide headwinds as Polygon grapples with increased layer-2 competition and the recent shutdown of its zkEVM solution, testing key support levels.
Quick Take
• MATIC trading at $0.38 (down 0.3% in 24h) • Layer-2 sector competition weighs on sentiment following Polygon zkEVM shutdown • Price testing critical support near $0.35 with RSI at neutral 38 • Bitcoin correlation remains weak as crypto markets show mixed signals
Market Events Driving Polygon Price Movement
The most significant catalyst affecting MATIC price this week stems from intensifying competitive pressures in the layer-2 scaling sector, compounded by the shutdown of Polygon zkEVM. This development has contributed to a substantial 32% decline since May, with MATIC price dropping from its 2024 peak by approximately 74%.
The broader cryptocurrency market context shows Bitcoin experiencing minor weakness, trading below 105,000 USDT with a 0.43% daily decline. However, traditional markets are displaying resilience, with the Dow Jones gaining 132 points as market attention shifts toward Federal Reserve interest rate decisions and geopolitical tensions in the Middle East appear to be subsiding.
Regulatory developments are providing some positive backdrop for the crypto sector, with a White House advisor revealing that a cryptocurrency bill is approaching final approval. This news, combined with Prenetics' $20 million Bitcoin treasury adoption, suggests institutional interest remains intact despite sector-specific challenges facing layer-2 protocols.
MATIC Technical Analysis: Bearish Momentum Dominates
Price Action Context
Polygon technical analysis reveals MATIC price currently trading below all major moving averages, with the immediate resistance at the 20-day SMA of $0.43. The token sits well below its 200-day moving average of $0.69, indicating a prolonged bearish trend structure. Trading volume on Binance spot market remains subdued at $1.07 million, suggesting limited institutional participation at current levels.
The price action shows MATIC following broader crypto market weakness rather than exhibiting independent strength, with correlation to Bitcoin remaining moderately positive despite the sector-specific headwinds.
Key Technical Indicators
The RSI reading of 38 places MATIC in neutral territory but trending toward oversold conditions, potentially setting up for a technical bounce if support holds. The MACD histogram at -0.0045 confirms bearish momentum persistence, while the Stochastic oscillator readings (%K: 25.19, %D: 19.74) suggest the token is approaching oversold levels.
Bollinger Bands positioning shows MATIC price in the lower portion of the trading range, with the %B reading of 0.2879 indicating proximity to the lower band at $0.31.
Critical Price Levels for Polygon Traders
Immediate Levels (24-48 hours)
• Resistance: $0.43 (20-day moving average confluence) • Support: $0.35 (immediate technical support level)
Breakout/Breakdown Scenarios
A break below the $0.35 support level could accelerate selling toward the strong support zone at $0.33, which coincides closely with the Bollinger Band lower boundary. Conversely, a reclaim above $0.43 would need to be sustained to challenge the next resistance cluster around $0.58, though this appears unlikely given current momentum conditions.
MATIC Correlation Analysis
• Bitcoin: MATIC price showing weak positive correlation with BTC, though underperforming due to sector-specific pressures • Traditional markets: Limited direct correlation observed, with crypto markets operating somewhat independently of equity strength • Sector peers: Layer-2 tokens experiencing broad-based pressure amid competitive landscape shifts
Trading Outlook: Polygon Near-Term Prospects
Bullish Case
Recovery above $0.43 resistance, accompanied by increased volume, could signal short-term stabilization. Successful defense of the $0.35 support level with RSI bouncing from current neutral readings would support a technical rebound toward $0.45-$0.50 range.
Bearish Case
Failure to hold $0.35 support amid continued layer-2 sector headwinds could accelerate decline toward $0.31 (Bollinger lower band) and potentially the strong support at $0.33. Sustained trading below the 200-day MA at $0.69 maintains the longer-term bearish structure.
Risk Management
Conservative traders should consider stop-losses below $0.33 for long positions, while short-term traders might target the $0.35-$0.43 range. Given the daily ATR of $0.03, position sizing should account for potential 8-10% intraday volatility.
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