- Arbitrum would face massive resistance at the $1.4 and $1.6 levels, but a breakout could lead to price discovery.
- Polygon had a stronger bullish bias and presented a good buying opportunity with room for more gains than ARB.
Ethereum’s layer 2 network Arbitrum [ARB] was in an interesting position. Among others the weekly The Arbitrum report highlighted the milestone of reaching the network’s 300 million transactions. On the other hand, there were indications of significant capital outflows from the ARB market.
Read Arbitrums [ARB] Price Forecast 2023-24
Polygon [MATIC] also saw news developments likely to impact investor sentiment. The one that traders and investors may be most interested in is the proposal by Polygon Labs to replace MATIC with the native token POL. A more in-depth dive can be viewed here.
Who has the advantage in the match between Arbitrum and Polygon?
In terms of price action, both altcoins have an optimistic view of the higher timeframes. Arbitrum has been on the market for a much shorter time than Polygon, making comparison of some on-chain metrics less straightforward. The comparison was more apparent on the price charts and the winner of Arbitrum vs Polygon would likely be the last in terms of performance in the coming weeks.
The crypto market as a whole has increased in value since mid-June. The Tether Dominance statistic fell from 8.53% on June 15 to 6.74% on July 13, highlighting the stablecoin’s capital flow into crypto assets. This was accompanied by an increase in the altcoin’s market cap from $300 billion to $350 billion. Meanwhile, Bitcoins [BTC] dominance has also taken a hit in the past three weeks.
It fell from 52.18% on June 28 to 49.74% on July 15, a drop of 4.67%. Therefore, it was not surprising that MATIC and ARB had an optimistic outlook last month – this was a market-wide trend.
Overhead resistance was close for ARB, while MATIC noted a return to a strong support level
Source: ARB/USDT on TradingView
Arbitrum’s 1-day chart showed that the price action had a bullish structure. This came in mid-June as ARB climbed above the $1,153 mark and turned the structure bullish. It also established a higher low at $1.06. Over the past five days, ARB is up 21.8% as measured from its low of $1,108 to its high of $1.35.
There was a bearish order block (cyan) in the $1.2 zone, but daily trading sessions placed candles above this zone over the past three days, underlining clear bullish intent. But no daily trading session has closed above this zone since the end of May. When that happens, the bearish order block would flip to a bullish breaker or a support zone.
From there, ARB may form a consolidation base before moving higher into the $1.4-$1.5 bearish order block (red box) from April 21. At the time, ARB’s inability to defend the $1.6 zone on the lower time frames showed bearish dominance. Therefore, heading north, it was very likely that both the marked order block and the $1.6 level would offer intense resistance to the bullish advances.
It may take some time for the buyers to work their way through the order book that is likely full of sell orders, but it was possible. The RSI stood at 67 at the time of writing and showed strong bullish dominance. Combined with the structure, a move to $1.4 seemed likely. The OBV had a slump in July, but started rising over the past three days.
The Fibonacci retracement levels presented a nice buying opportunity for MATIC bulls
Source: MATIC/USDT on TradingView
Polygon’s native token also has a bullish outlook on the 1-day chart, as we’ve already discussed. The bullish structure came about when the price moved above USD 0.678 on June 22. Since then, MATIC also registered a higher low at $0.6 before rising further in July.
Based on this rally from $0.6 to $0.8916, a series of Fibonacci retracement levels were drawn. The 50% and 61.8% retracement levels sat at $0.746 and $0.711, with the price just above $0.77 at the time of writing. Therefore, a test of any of these retracement levels would present a buying opportunity with an invalidation below $0.648, the most recent higher low.
To confirm the bullish findings of the price action chart, the OBV has moved higher since the end of June. This showed strong buying pressure and steady demand for the token. The RSI was also in bullish territory above the neutral 50, indicating that upward momentum remains strong.
In the north, the local high at $0.8916 and the 23.6% expansion level at $0.96 are targets for the bulls to take profits. The $0.95-$1.02 region is a higher time frame resistance zone and also has a confluence with round number psychological resistance.
Statistics showed that the holders of both assets had unrealized gains
Source: Sanitation
The average coin age chart has been climbing higher for Arbitrum in recent weeks, showing network-wide accumulation. The 30-day MVRV ratio was positive, showing that holders of the token were sitting on unrealized gains. The value approached its peak from April 16, when a selloff hit the market. It was unclear if the same could repeat, but buyers should be on the lookout.
Meanwhile, development activity continued with no correlation to the price action, encouraging long-term investors. Overall, the statistics examined showed that buyers have had an advantage in recent days.
Source: Sanitation
MATIC’s average coin age showed that sellers were dominant in the market and accumulation was not underway. This has been the case since early June, although a jump in this statistic has been seen in recent days. Overall, the finding weakened MATIC’s bullish case.
Is your wallet green? Check the Polygon Gain Calculator
The MVRV ratio climbed to the highs from mid-February. The closer it gets, the more wary buyers should be of the selling pressure that can come from profit-taking. On the other hand, development activity continued to evolve as in 2023, showing that investors are making progress.
Of the two, MATIC had a clearer bullish bias and more room for gains than ARB, based on the price charts. But if ARB could break past the $1.6 region, the resistance overhead would weaken dramatically and it could even re-enter price discovery. Longer-term bulls should also be wary of the points on the chart where their bullish position becomes invalid.