Assessing Polygon’s rally: record token burns vs. rising profit‑taking risk
Polygon’s native ecosystem token, POL, has exploded higher in January, delivering one of the strongest performances among major altcoins. From the start of the year, the asset has climbed nearly 75%, with a gain of around 9.3% in the last 24 hours and roughly 48.5% over the past week alone. This surge began in tandem with Bitcoin’s sharp New Year move and the broader crypto market rebound, but POL has managed to hold its own even as Bitcoin’s momentum recently cooled.
Behind the price action is a mix of narrative, on-chain milestones, and speculative interest that together paint a more complex picture than “number go up.” While bulls are clearly in control on higher timeframes, several metrics suggest that near-term overheating and profit-taking could interrupt the climb — even if the larger trend remains constructive.
Record demand, fees, and a historic burn
A key catalyst for the latest leg of the rally came on 7 January, when the Polygon Foundation announced that POL had just recorded an all-time high in both network demand and single-day fees generated. This spike in on-chain activity translated into a record token burn of just over 3 million POL, equivalent to around 0.03% of the total supply.
For traders and long-term holders alike, such a burn event is significant. When network usage surges, the resulting fee burn reduces circulating supply over time, effectively introducing a deflationary dynamic — especially if demand continues to outpace new issuance. The market often interprets such structural reductions in supply as bullish, and this case was no exception: the burn narrative reinforced the already strong upward momentum in price.
In parallel, the broader “Polygon Open Money Stack” initiative has helped frame POL’s rally as more than just a speculative spike. The initiative aims to support frictionless, global money movement, positioning Polygon as a key infrastructure layer for payments and financial applications. This forward-looking vision has further boosted sentiment, as investors increasingly look for networks that can support real economic activity rather than short-lived hype.
Derivatives data: strong speculation, but soft spot demand
Under the surface, derivatives market data provides a more nuanced view of POL’s current rally. According to aggregated market statistics, open interest in POL futures has more than doubled in recent days, jumping from about 37 million dollars to around 92 million. Such a sharp expansion in open interest typically signals a rapid increase in leveraged participation — traders are piling in, expecting further volatility and continuation of the trend.
However, this surge in leveraged positioning is not fully matched by spot market buying. The spot Cumulative Volume Delta (CVD), which tracks net spot buying versus selling, has actually declined sharply during this period. A falling spot CVD in the face of rising prices and climbing open interest implies that spot buyers are no longer the primary force driving the move; rather, leveraged traders are pushing the market higher.
This divergence between spot demand and price strength can be an early warning sign. When derivatives activity becomes the dominant driver of upside, rallies are often more fragile and vulnerable to sharp corrections once momentum fades or liquidations cascade. In other words, while the trend remains bullish, the foundations are not as solid as they would be with strong, sustained spot accumulation.
On-chain profitability and the growing incentive to take profits
On-chain metrics further underscore the risk that profit-taking could cap or interrupt the current advance. Data for 90-day holders indicates that this cohort has moved back into profit after a prolonged period of underwater positions. Whenever a large share of recent buyers transitions into the green, the temptation to lock in gains normally rises — especially in a market still marked by macro uncertainty and lingering scars from previous drawdowns.
At the same time, the mean coin age metric has remained largely flat. A stationary mean coin age suggests that long-held coins are not yet being moved en masse. Long-term holders appear, for now, to be sitting tight and not aggressively distributing to the market. That dynamic can be interpreted as moderately bullish: it implies that much of the selling pressure, if it emerges, would likely come from shorter-term traders rather than deeply entrenched holders.
However, the Market Value to Realized Value (MVRV) ratio has climbed back into positive territory. A positive and rising MVRV means that, on average, investors are holding coins that are now worth more than their cost basis. Historically, when MVRV pushes decisively above zero and continues to rise, it often precedes periods of distribution as participants harvest profits. The combination of profitable short-term holders and elevated MVRV creates a backdrop where any sign of weakness can rapidly translate into heavier selling.
Technical picture: powerful momentum heading into key resistance
On the daily chart, POL’s uptrend is unmistakable. Over the past ten days, bullish candles have dominated, reflecting strong and persistent buying interest. The Chaikin Money Flow (CMF), which measures buying and selling pressure by incorporating both price and volume, has printed robust positive readings, signaling that capital flows remain firmly in favor of the bulls.
Trading volumes have consistently stayed above the 20-day moving average, confirming that the current move is accompanied by meaningful participation rather than thin, illiquid spikes. Meanwhile, the Relative Strength Index (RSI) has surged to its highest levels since November 2023, placing POL in or near overbought territory on the daily timeframe.
From a pure price-structure perspective, the nearest key supply zones now sit around 0.18 and 0.20 dollars. These are levels where sellers may be waiting in size, either to take profits or to initiate new short positions. Among them, the 0.20 dollar area stands out as particularly important. A decisive daily close above 0.20 would mark a notable bullish shift in the market’s swing structure and could be interpreted as a confirmation of a new, higher trading range. For longer-term investors, such a breakout would often be seen as a higher-conviction buying signal — provided the move is supported by strong volume and improved spot demand.
Short-term risks: what could derail the rally?
Despite the strong backdrop, POL’s rally is not without significant short-term risks. The first and most obvious is simple overextension. With the RSI in elevated territory and price already up nearly 75% month-to-date, the market is more susceptible to even minor negative catalysts. A small wave of profit-taking could quickly snowball, especially given the heavy presence of leveraged traders whose positions may be forced to close if volatility spikes in the opposite direction.
The divergence between falling spot CVD and rising price is another yellow flag. If spot buyers continue to retreat while derivatives traders remain overexposed, the rally can morph into a classic “blow-off” pattern. Once perpetual funding rates normalize or turn unfavorable, and if open interest starts to unwind, prices can retrace sharply to find a level where genuine spot demand steps back in.
Additionally, macro conditions and Bitcoin’s price behavior remain critical. POL’s initial move higher was closely linked to Bitcoin’s early January surge. Should Bitcoin enter a deeper corrective phase or if risk appetite deteriorates across crypto, altcoins like POL typically suffer outsized drawdowns. Traders who are eyeing long entries near resistance need to be aware that correlations can reassert themselves abruptly in risk-off phases.
What this means for traders in practice
For short-term traders, the current setup offers both opportunity and danger. On the one hand, momentum is clearly on the side of the bulls, and the approach to the 0.18–0.20 dollar resistance zone may provide intraday or swing opportunities, particularly if price consolidates just below resistance before attempting a breakout. Such consolidation patterns can serve as springboards for a final thrust higher.
On the other hand, entering aggressively into strength when key on-chain and derivatives indicators are flashing warning signals requires careful risk management. Tight stop-losses, reduced position sizes, and a willingness to take partial profits into strength can help mitigate the downside if the rally stalls or reverses. Traders may also look for confirmation from metrics such as a renewed uptick in spot CVD or signs that open interest growth is stabilizing rather than accelerating parabolically.
A failure to break decisively above 0.20, especially if accompanied by declining volume and worsening divergences on oscillators, could set the stage for a deeper pullback. In such a scenario, former resistance zones and recent consolidation areas may become potential support levels where dip buyers could re-enter — but these should be validated by renewed spot accumulation.
Considerations for longer-term investors
Longer-term participants, including those looking at multi-month horizons, might interpret the recent developments somewhat differently. The record burn, growing network activity, and strategic initiatives such as the Open Money Stack all align with a thesis that Polygon is steadily cementing itself as a key infrastructure layer in the multi-chain ecosystem.
For these investors, the exact entry level between 0.18 and 0.20 dollars may be less critical than the broader trend of adoption and tokenomics. Still, waiting for confirmation in the form of a sustained close above 0.20, followed by a healthy consolidation rather than a vertical spike and crash, could increase the odds of entering into a more durable uptrend rather than chasing a local top.
They may also place greater emphasis on signs that long-term holders continue to accumulate or at least hold firmly — for instance, a gradual increase in mean coin age after a correction, or a reset in MVRV to more neutral levels after a period of overheated valuations. Such signals would suggest that the market is transitioning from speculative fervor to more fundamental, conviction-based holding.
How token burns shape the long-term narrative
The record burn of over 3 million POL in a single day deserves special attention beyond its short-term price impact. If Polygon continues to generate high levels of network activity, recurring burns could exert a meaningful influence on the supply trajectory of POL. Over a long-enough horizon, consistent reductions in circulating supply, coupled with even modest demand growth, can have a compounding effect on valuation.
However, it is important to recognize that token burns are not a magic bullet. Their impact depends heavily on the sustainability of the underlying network usage. If activity surges only during speculative mania and fades thereafter, burn-driven scarcity may be more cosmetic than structural. The real test will be whether Polygon can maintain elevated usage across DeFi, gaming, payments, and other use cases that the Open Money Stack and related initiatives are designed to serve.
Balancing narrative and data
Narratives, especially in crypto, can drive powerful rallies — and Polygon’s current narrative of high demand, record fees, and ambitious infrastructure goals is particularly compelling. Yet the data under the hood reminds market participants that even the strongest story must contend with cyclical profit-taking, leverage dynamics, and behavioral patterns that tend to repeat across bull and bear phases.
The fact that 90-day holders are back in profit, MVRV is positive, and derivatives open interest has ballooned while spot CVD declines suggests a market entering a more fragile phase of its advance. Prices can absolutely continue higher in such an environment, especially if new buyers are attracted by breakout headlines, but the margin for error narrows.
For those watching Polygon closely, the 0.18 and especially the 0.20 dollar zones are where these crosscurrents are likely to collide. A clean breakout with strong spot participation could open the door to a new leg higher. A rejection and pullback, particularly if harsh, would instead validate the caution implied by on-chain and derivatives indicators.
Final thoughts and risk reminder
Polygon’s POL token enters the mid-January stretch with powerful momentum, record network metrics, and a supportive long-term narrative — but also with growing signals of short-term strain. Whether the coming sessions deliver a breakout or a correction will depend not just on Polygon-specific developments, but also on broader market sentiment, Bitcoin’s trajectory, and how current holders choose to react to newfound profits.
Anyone considering trading, buying, or selling POL or other cryptocurrencies should treat these markets as inherently high risk. Volatility can be extreme, and even seemingly clear trends can reverse rapidly. It is essential to conduct independent research, understand the tools and indicators being used, and only risk capital that one can afford to lose.