Polygon’s price has been in a steady decline recently, as it faces increasing competition in the layer-2 industry. MATIC, the native token of Polygon, dropped to a crucial support level at $0.4343 on Friday. Although it has since recovered slightly, it is still trading around 60% lower than its peak earlier this year and a significant 82% below its all-time high.
The layer-2 industry has become more crowded in recent years, putting pressure on Polygon. Its total value locked (TVL) in the DeFi sector has plummeted from a record high of nearly $10 billion to $872 million. In terms of MATIC, the TVL has dropped from 5.7 billion to 1.78 billion.
In contrast, Arbitrum, a prominent layer-2 network, has attracted 661 DeFi developers and currently has a TVL of over $3 billion. Polygon has also been surpassed by other players like Base and Blast, which have $1.4 billion and $1.2 billion in assets, respectively. Optimism has also taken a portion of Polygon’s market share.
This fierce competition is a significant factor in the 82% decline in MATIC’s price from its all-time high.
Despite these challenges, Polygon still boasts some positive on-chain metrics. It has over 1.09 million addresses, making it the second-largest chain after Tron, which has 2.09 million addresses. Additionally, the network’s daily transactions have remained stable, consistently surpassing 3.8 million since March 11th of this year.
Furthermore, the volume of stablecoins in Polygon has been steadily increasing since October of last year. It has risen from 1.17 billion MATIC to over 1.8 billion as of Tuesday. Stablecoins play a crucial role in blockchain transactions.
Notably, Polygon offers a higher staking yield compared to most cryptocurrencies. With a staking yield of 5.67%, it surpasses Ethereum’s 3.29% and Cardano’s 2.9%.
Despite these strengths, Polygon’s price has experienced a sharp decline in recent weeks. It has also fallen below a critical support level, potentially negating a double-bottom pattern that was forming. If this decline is not a false breakdown, there is a high likelihood that Polygon will continue to fall and reach the next support level at $0.3206, which represents its lowest point in June 2022 and is approximately 37% lower than its current level.