Polygon (MATIC) is experiencing a decline in price following the United States Securities and Exchange Commission (SEC) announcement that the crypto asset is among ten identified as securities. This has caused a panic among investors who are now withdrawing their tokens from various decentralized finance (DeFi) smart contracts, further adding downward pressure to the price. The big question is, where can investors expect MATIC’s price to find support?

The recent SEC court filing against Binance has caused negative sentiment across the markets, with MATIC’s price dropping by 15%. Panic-stricken investors are withdrawing large amounts of tokens from smart contracts, potentially flooding the market with unstaked tokens and triggering further sell-offs in the coming days. A closer look at the underlying data shows that between May 29 and June 8, MATIC Supply in Smart Contracts dropped from 64.9% to 63.7%, meaning that 111.5 million MATIC tokens (1.2% of the total circulating supply) have been unstaked.

The Supply in Smart Contracts metric tracks how much of a cryptocurrency’s total circulating supply that holders have locked up across various DeFi protocols. The large volume of unstaked tokens in a short period could cause a sudden increase in the volume of tokens available for trading on exchanges, posing a threat to the market price. Currently trading at $0.78, the recently unstaked tokens are worth approximately $87 million. If they are pumped into the market, MATIC holders can anticipate further price declines soon.

Long-term Investors Losing Confidence in Polygon’s Ecosystem

In addition to the trend of withdrawing unstaked tokens, the rise in Age Consumed indicates low confidence among long-term investors in Polygon’s ecosystem. On-chain data confirms that long-term investors have been increasingly offloading their coins, causing a 2,400% spike in MATIC Age Consumed from 38.2 million to 950.9 million between June 2 and June 8.

The Age Consumed indicator measures the trading activity of long-term investors by tracking the number of recently sold coins multiplied by the number of days since they were last moved. A considerable spike in Age Consumed, as seen above, suggests that long-term holders are selling a large amount of coins, which could cause potential new investors to become bearish about MATIC’s future price prospects.

The newly unstaked tokens, potentially flooding the market, alongside the lack of confidence among long-term holders are critical bearish factors predicting a further drop in the price of MATIC in the coming days.

MATIC Price Prediction: Bears Can Push the Price for a $0.65 Retest

According to IntoTheBlock’s In/Out of the Money Price (IOMAP), MATIC may experience initial support around $0.76, where an expected demand wall mounted by 8,800 addresses bought 606.5 million MATIC at an average price of $0.76. If the initial support fails, MATIC’s price may decline as low as $0.65, indicating that pessimistic sentiment among long-term investors suggests further price drops.

However, inversion of this pessimistic sentiment is also possible if MATIC’s price manages to break above $0.80. The IOMAP reveals that some of the investors who purchased 183.4 million coins around $0.80 could resist. In this scenario, MATIC’s price is likely to rise as far as $0.89.