• Polygon’s DeFi TVL has surged to a 7-month high of $1.16 billion.
• Despite the network growth, POL still showed bearish signals with a rounding top pattern on its four-hour chart. 

POL (formerly MATIC) has been under bearish pressure after dropping by nearly 20% in 30 days.

As AMBCrypto reported, more than 98% of POL holders are sitting on losses, highlighting negative market sentiment. 

POL traded at $0.324 at press time. Data from CoinMarketCap shows trading volumes had dropped by 5% suggesting waning interest in traders in the altcoin. 

Despite the price drop, the Polygon network has recorded a surge in activity, especially in decentralized finance (DeFi). 

Polygon DeFi TVL reaches 7-month high 

Polygon’s DeFi Total Value Locked (TVL) stood at $1.164 at press time per DeFiLlama. The TVL is at its highest level since March, showing rising usage for DeFi applications built on the network. 

At the same time, DeFi volumes have recorded a gradual growth to $267M at press time. The last time that Polygon’s DeFi volumes were at these levels was also in March.

The top application driving the surge is the Polymarket betting site, which accounts for $353M of the network’s TVL.

This month alone, Polymarket’s TVL has nearly tripled, with the upcoming U.S. elections being a catalyst for this growth. 

Despite this positive data, the POL token continues to portray bearish signals. 

POL forms a rounding top pattern

Polygon appears to be coiling up for a rounding top pattern. This is a bearish reversal pattern that suggests POL is cooling off from its bullish trend as selling pressure gradually increases. 

POL will complete the rounding top pattern if it drops to test support at $0.31.

If POL establishes this neckline and breaches this support, it could create a sell signal that could send prices plunging lower. 

Technical indicators hint at further downward momentum. The Chaikin Money Flow (CMF) has a negative value of -0.21 showing that the selling pressure is higher than the buying pressure. 

The Relative Strength Index (RSI), which has a reading of 42, also points towards bearish momentum.

The RSI is also tipping south, indicating that selling activity is increasing. If buyers fail to step in, it further reinforces the bearish thesis around POL. 

Polygon’s derivatives data shows THIS 

The derivatives market shows more bearish signs around POL. Despite the 8% surge in volumes, open interest had dropped by 3% to $49M at press time. 

This drop shows that derivative traders are closing their existing positions on POL.

The reduced market participation also indicates a lack of conviction among traders in POL’s future price movements.

The long/short ratio at 0.88 shows that short positions are more than long positions, further underscoring the bearish sentiment. However, on Binance, there are more traders with long positions than short positions. 

Is your portfolio green? Check out the POL Profit Calculator

The bias towards short positions could be attributed to an influx of liquidations. In the last 24 hours, more than 90% of the liquidated trades have been short positions. 

Despite the retail market showing a bearish sentiment towards POL, institutions or smart traders remain bullish per Market Prophit.