Polygon MATIC still in buy zone despite 11% rise

• Over 81% of MATIC addresses are out of the money.
• ETH ETF approval expectations caused a spike in trading volume and large holder inflow.
• Retail investors must exercise caution as MATIC has a 60% whale concentration.

Polygon (MATIC) on-chain signal on Friday is hinting at a potential buy opportunity as many expect that the Ethereum (ETH) scaling solution may see a rally in the coming weeks following spot ETH ETF approval.

Also read: Polygon could surge 30% following month-long consolidation

MATIC signals good buy opportunity

Following the approval of spot ETH ETFs, many expect Ethereum-based ecosystem cryptocurrencies to rise in the coming weeks.

For example, several DeFi and Layer 2 tokens, including Polygon (MATIC), Uniswap (UNI), Lido DAO (LDO), Arbitrum (ARB), and Optimism (OP), posted double-digit gains in the buildup to ETH ETF approval. With the ETFs approved, expectations are that these tokens will rally alongside ETH.

Among these tokens, MATIC's on-chain data indicates it's in a good buy level despite the recent price rise. Although MATIC posted an 11% gain on Tuesday, 82% of holders are still out of the money, according to data from IntoTheBlock.

Read more: Polygon launches zk-based Ethereum scaling solution Miden on testnet, fuelling Layer 2 war

In/Out of the Money measures the average cost price of an asset and compares it with its current price. If the current price is higher than the average cost price, an address is in the money and vice versa if it is lower. The metric helps to gauge if a potential profit-taking or buying opportunity is on the horizon for an asset.

With 82% of holders out of the money and ETH impact signaling a rally may be on the horizon, MATIC's current price presents a potential buy opportunity.

MATIC Global In/Out of the Money

Additionally, 61% of addresses that bought around the current price of $0.722 — typically between $0.614 and $0.833 — are also out of the money, although their volume shows large holders are slightly in the money.

Trading volume shot from $17 million to $86 million, coinciding with a spike in large holder inflow/purchase. This indicates bullish sentiment, as confirmed by IntoTheBlock's signal summary, which is 'mostly bullish.' Hence, as MATIC's price has yet to reflect the bullish view, the current price level may be a good opportunity to buy the asset before a potential rally.

MATIC signal summary

However, retail investors must exercise caution as MATIC has a 60% whale concentration. Tokens with a large whale concentration have the risk of seeing retail traders take a hit in a quick sell-off event.

MATIC/USDT 4-hour chart

This bullish sentiment will be confirmed if MATIC breaks the $0.7778 resistance of May 6. However, if MATIC breaches the $0.695 support of May 23, the bullish sentiment will be invalidated.