Polygon holds KEY support after 100M POL burn: What’s next?

Polygon [POL] continued to trade within a thin margin, still holding the $0.10 support level. The altcoin flipped its short-term moving average EMA20, signaling strengthening momentum. 

At the time of writing, POL traded at $0.108, up 4.06% on the daily charts. This slight price uptick was backed by a 17% jump in trading volume, indicating increased on-chain activity. 

Polygon burns 100M tokens

With POL struggling to hold an upside momentum, Polygon has continued to deploy its major deflationary tool to absorb market pressure.

According to the official report, Polygon has achieved a major milestone, burning 100 million POL. Typically, token burns help shrink the circulating supply, reduce inflation, and thus accelerate an asset’s upside momentum. 

Even more importantly, sustained token burns reflect higher fees and network revenue, a sign of increased network usage and adoption.

In fact, at the time of writing, Daily Fees and Revenue have stabilized above $200k, with App Fees holding above $500k. When network revenue continues to rise, it suggests higher network participation and actual demand. 

A network with sustained demand can boost its native token, potentially driving prices higher. 

Any impact on POL price action?

In the short term, Polygon’s token burns have tended to positively impact POL’s price, as the altcoin slightly jumped from the lower boundary.

Notably, the altcoin’s Stochastic RSI made a bullish crossover and rose to 88.27 as of writing, although its signal line remained around 88.

With Stoch rising to such levels, it suggested strong upside momentum as demand stepped into the market. However, the signal remained roughly the same, suggesting a strong seller presence.

Such market conditions indicate a fierce struggle between bulls and bears for market control. For a bullish takeover, POL buyers must push for a daily close above the EMA 20 and EMA 50 at $0.11, setting up a move towards $0.12.

However, if the momentum turns short-lived and sellers cash out these minor gains, the altcoin will pull back towards $0.106.

Inflo remains elevated

Interestingly, despite continued token burns, POL’s inflation remains extremely elevated, signaling higher sell pressure. According to Santiment data, the altcoin’s Stock-to-Flow Ratio continued to decline, falling to 8.6 at press time. 

A drop in SFR suggests low scarcity and increased immediate supply. A high supply presents a significant selling pressure in the market. 

Even more so, the altcoin’s Exchange Supply Ratio surged to a monthly high of 0.003. When ESR rises, it suggests that a significant amount of Polygon has recently flowed into exchanges. 

Therefore, sellers are more active than buyers on exchanges, further straining the already overwhelmed market. Typically, such market conditions tend to accelerate downside momentum, leading to lower prices.

Final Summary

• Polygon reaches a major deflationary milestone by burning 100 million POL tokens, though inflation remains elevated. 
• POL rose 4% on daily charts, flipping EMA20, indicating short-term bullish momentum.