Is the current downward trend for MATIC a precursor to an upward surge, or is it indicative of ongoing challenges? How are analysts predicting its future moves?
Table of Contents
How is Polygon (MATIC) faring?
How can Polygon enhance its market position?
Mixed opinions on Polygon: Reddit weighs in
What are the experts saying?
Polygon (
MATIC
) burst onto the cryptocurrency scene with ambitious goals. It sought to address Ethereum’s (
ETH
) scalability issues by offering quicker and more cost-effective transactions through its
layer-2
solution. Despite these lofty ambitions, MATIC has seen significant price drops from its peak.
MATIC reached $2.92 in December 2021 but is currently trading at $0.71, marking a nearly 76% decline as of May 29. This drop is noteworthy considering the recent bullish trends in the broader crypto market, where many top cryptocurrencies have seen substantial gains.
Meanwhile, Polygon recently underwent the Napoli upgrade to boost its scalability and performance. However, this upgrade has yet to translate into positive price movements, with MATIC facing bearish trends and significant sell-offs by investors.
In this article, we will delve into the factors contributing to MATIC’s underperformance, exploring whether it is truly stagnant or in a phase of consolidation with potential for a rebound.
How is Polygon (MATIC) faring?
Let’s delve into Polygon (MATIC)’s performance and compare it with its competitors, Arbitrum (
ARB
) and Base. We will assess total value locked (
TVL
), user activity, transaction volumes, and decentralized applications (
dApps
) volume.
TVL
TVL represents the total value locked in a
blockchain
‘s
smart contracts
, reflecting the assets people have entrusted to the blockchain. Higher TVL typically indicates more trust and usage.
According to
DeFi LIama
, as of May 29, Polygon boasts a TVL of $971.38 million, ranking 11th among all blockchains. While this sounds impressive, let’s compare it to its rivals.
Arbitrum leads with a TVL of $3.12 billion, ranking 5th, followed by Base with $1.741 billion, ranking 7th. Polygon lags behind these two significantly. Additionally, while Arbitrum and Base have seen increases in TVL, Polygon has witnessed a decline in its TVL.
Now, let’s consider the market cap to TVL ratio of Polygon and Arbitrum. This ratio helps gauge how the market values the blockchain relative to its TVL.
Polygon’s ratio is 6.93, indicating that its market cap is nearly seven times its TVL. In contrast, Arbitrum’s ratio is 1.02, reflecting a more balanced valuation.
A high ratio for Polygon suggests that while the market is optimistic about its future potential, the actual value locked in the network is relatively low compared to its market cap. This imbalance may imply that investor confidence is more speculative rather than grounded in current utility and adoption within the network.
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User activity and transactions
User activity
User activity is measured by the number of unique active wallets (UAW). According to
Dapp Radar,
Polygon has 6.76 million UAW in the last 30 days as of May 29, ranking 3rd in this category. This surpasses Arbitrum’s 5.78 million and Base’s 2.74 million.
A high number of active users typically signifies a vibrant and engaged community, crucial for the long-term success of any blockchain.
Transaction volumes
As of May 29, Polygon has processed 55.75 million transactions in the last 30 days, a commendable figure. In comparison, Arbitrum processed 23.98 million transactions, and Base processed 19.47 million transactions in the same period. Let’s delve deeper.
DApps volume
DApps, akin to apps on your phone but operating on a blockchain, drive user engagement and transaction volumes, playing a pivotal role in any blockchain ecosystem.
In the last 30 days as of May 29, Polygon’s dApps volume stood at $7.91 billion, a substantial amount. However, when compared to Arbitrum’s $30.42 billion and Base’s $8.64 billion, Polygon’s volume appears modest.
Moreover, despite fewer transactions, Arbitrum’s dApps volume surpasses Polygon’s significantly, and Base’s dApps volume is slightly higher. This data suggests that transactions on Arbitrum may involve larger sums or more valuable activities, while Polygon’s higher transaction count may involve smaller-scale transactions.
How can Polygon enhance its market position?
Faster transactions and lower fees:
To attract more users, Polygon needs to expedite transactions and reduce fees. For instance, in the last 30 days, Arbitrum achieved a max TPS (transactions per second) of 532, higher than Polygon’s 282. Also, Polygon’s average transaction fee of around $0.01 exceeds Arbitrum’s $0.001. Lowering fees and speeding up transactions can enhance Polygon’s appeal.
Improved staking incentives:
Offering higher rewards or unique benefits for staking can incentivize users to lock their assets. Ethereum 2.0 successfully employed this strategy, attracting substantial capital. Platforms like Lido (
LIDO
) saw remarkable growth due to attractive liquid staking rewards.
High-demand dApps:
Developing popular dApps can inject more value into the ecosystem. DeFi applications such as decentralized exchanges (
DEXs
) and lending platforms can draw significant assets. Uniswap (
UNI
) on Ethereum exemplifies this, boosting TVL through high transaction volumes and liquidity pools.
Enhanced DeFi offerings:
Providing competitive DeFi services like lending, borrowing, and yield farming can allure users seeking high returns. Aave (
AAVE
) stands out as a platform that attracted billions in TVL through its appealing DeFi services.
Successful upgrades:
Introducing upgrades akin to the Napoli upgrade can enhance performance and scalability, making the platform more appealing for users to lock their assets.
Mixed opinions on Polygon: Reddit weighs in
Public sentiment on a Reddit
thread
about Polygon reflects a diverse range of views, from optimism about its long-term potential to concerns about its recent performance and market position.
Many users remain optimistic about Polygon’s future despite its recent price decline. They view MATIC as a “sleeping giant” with significant growth potential.
For instance, some users hold substantial amounts of MATIC bought at various price points and have staked their tokens to earn passive income. Staking MATIC on-chain can yield returns of around 3%, seen as a viable method to accumulate more tokens over time.
Nevertheless, concerns linger about Polygon’s recent performance. Some users noted MATIC’s recent drop amidst other cryptocurrencies’ rise, leading to frustration and skepticism. Some attribute this decline to large whale investors periodically offloading their holdings, creating selling pressure that impacts the token’s price.
Meanwhile, comparisons with other blockchains like Solana (
SOL
) highlight new challenges for Polygon. While Solana’s use surged due to specific
applications
like
meme coin
transactions, MATIC, as Polygon’s fee token, lacks a similar retail-driven use case.
Some users point out that MATIC’s price action aligns with its market cycle, recalling its earlier bottom during the bear market compared to most other tokens, suggesting its current performance may be a temporary phase.
Others believe that market attention often shifts to newer projects, leaving older ones to innovate continuously or risk fading into irrelevance.
Overall, most users retain optimism, viewing the current market as a precursor to an “alts season,” where alternative cryptocurrencies like MATIC could witness gains. They anticipate a shift in attention and investment back to projects with strong fundamentals like Polygon once the broader crypto market moves beyond Bitcoin (
BTC
) and meme coins.
What are the experts saying?
Expert opinions on Polygon vary widely, mirroring the public sentiment. Let’s explore what seasoned analysts have to say about MATIC’s current and future outlook.
In a recent analysis on TradingView, a prominent crypto analyst named Bixley expressed a bullish outlook for Polygon. Bixley highlighted that MATIC’s price is currently on a trend line just above $0.7, a critical position for potential breakout.
Failure to breach this trend line could lead to a bearish downturn for MATIC. However, Bixley remains optimistic, forecasting a breakthrough leading to upward price movement.
Drawing parallels between MATIC’s price performance and Ethereum in its early days, Bixley suggests that MATIC may be poised for a substantial increase if this comparison holds true.
Bixley outlined various target levels in the analysis, with the first target at $1.2, signifying a 70% increase from the current price. Subsequent targets include $5.4, marking a 650% rise.
However, not all experts share Bixley’s optimism. Another analyst highlighted a concerning pattern: a death cross on MATIC’s weekly chart.
A death cross, where a short-term moving average crosses below a long-term one, often signals bearish trends. This analyst predicts a potential 70% drop, pushing MATIC’s price below $0.2.
Adding another layer to the dialogue, Twitter users shared their perspectives on MATIC.
One tweet defended Polygon’s position despite its recent lack of gains, underscoring its long-term potential.
Another tweet raised the prospect of certain altcoins being phased out, as each market cycle sees some coins surge only to fade away without reaching new all-time highs.
As always in the crypto realm, it’s crucial to weigh these diverse perspectives and make informed decisions based on the most comprehensive data available. Remember never to invest more than you can afford to lose.
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