Polygon (POL) has been navigating a turbulent period, marked by significant price declines and a pervasive bearish sentiment across its ecosystem. This downturn is largely attributed to consistent liquidity outflows and a notable weakening of on-chain activity, signaling a challenging environment for the asset.
Mounting Liquidity Outflows
POL has experienced substantial liquidity outflows, both from its native blockchain and centralized exchanges, contributing to its ongoing bearish trend. On-chain data reveals a net outflow of approximately $105,900, suggesting investors are bridging their POL tokens to reallocate funds into potentially more profitable assets. This trend is mirrored off-chain, with spot exchanges seeing $263,000 worth of POL sold in a single day. The derivatives market also reflects this negative outlook, as Open Interest (OI) declined by $9.88 million, indicating a significant closure of positions. Such widespread outflows across all market segments exert considerable downward pressure on POL's price.
Declining On-Chain Engagement
Further compounding POL's challenges is a marked decrease in its on-chain activity. Weekly active addresses have fallen to 2.2 million, indicating a reduction in the utilization of POL and subsequently, a decline in demand. Equally concerning is the notable drop in new user adoption, with new users standing at a mere 99,000 despite a slight recent rebound. This lack of interest from new participants, coupled with existing users churning, points to a broader disinterest in the asset. While some technical indicators suggest POL has entered a key demand zone that historically triggered rallies, the persistent selling pressure threatens the efficacy of these support levels, potentially leading to further price erosion if demand does not resurface.
