Is Polygon a sleeping giant or a sinking ship? Analysis of MATIC’s next move

Is MATIC’s current bearish trend a harbinger of a bullish trend or a signal of ongoing struggles? How do experts predict the next steps?

Polygon (MATIC) entered the crypto scene with big promises. It aimed to solve Ethereum (ETH)’s scalability issues by offering faster and cheaper transactions through its Layer-2 solution. Despite these lofty targets, MATIC has experienced eye-popping price declines from all-time highs.

MATIC, which rose to $2.92 in December 2021, is trading at $0.71, down nearly 76% as of May 29. This decline becomes notable considering recent bullish trends in the broader crypto market, where many top cryptocurrencies have shown significant gains.

MATIC price chart | Source: CoinMarketCap

Meanwhile, Polygon recently underwent the Naples upgrade, which aims to improve its scalability and performance. However, this has yet to translate into positive price movement, with MATIC experiencing bearish trends and investors experiencing large-scale selling.

As part of today’s Naples Hard Fork, Polygon PoS became the first chain to enable Rollup Improvement Offering (RIP) with RIP-7212, bringing support for a new precompile for the secp256r1 curve!

— Polygon | Bulk (@0xPolygon) March 20, 2024

In this article, we will explore the factors that contributed to MATIC’s underperformance, examining whether MATIC is truly “dead” or simply in a phase of consolidation and potential recovery.

How is Polygon (MATIC) performing?

Now let’s look at how Polygon (MATIC) is performing and compare it to its rivals Arbitrum (ARB) and Base. We will examine total value locked (TVL), user activity, transaction volumes, and decentralized applications (dApps) volume.

TVL

TVL is the total amount of money locked in a blockchain’s smart contracts. Think of it as the total value of assets people have entrusted to the blockchain. Higher TVL generally means more confidence and more usage.

According to DeFi LIama, Polygon has a TVL of $971.38 million as of May 29, placing it 11th among all blockchains. This looks impressive, but let’s compare it to its competitors.

Polygon life TVL data | Source: DeFi LIama

Arbitrum ranks 5th in TVL with $3.12 billion, while Base ranks 7th with $1.741 billion. Polygon is well behind these two. Additionally, while the TVL of Arbitrum and Base increased, a downward trend was observed in the TVL of Polygon.

Arbitrum lifetime TVL data | Source: DeFi LIama Base’s lifetime TVL data | Source: DeFi LIama

Now let’s compare the market cap and TVL ratio of Polygon and Arbitrum. This ratio helps us understand how the market values ​​blockchain relative to TVL.

Polygon’s ratio is 6.93, meaning its market cap is almost seven times TVL’s. On the other hand, Arbitrum’s ratio is 1.02, indicating a more balanced valuation.

A high ratio for Polygon indicates that although the market is optimistic about its future potential, the actual value locked in the network is relatively low compared to market cap.

This discrepancy may indicate that investor confidence is based on future speculative growth rather than current utility and adoption within the network.

User activity and actions User activity

User activity is measured by the number of unique active wallets (UAW). According to Dapp Radar, Polygon ranked 3rd in this category with 6.76 million UAWs in the last 30 days as of May 29. Polygon’s UAW is higher than Arbitrum’s 5.78 million and Base’s 2.74 million.

A large number of active users generally indicates a healthy and engaged community; This is crucial to the long-term success of any blockchain technology.

Trading volumes

As of May 29, Polygon has processed 55.75 million transactions in the last 30 days; This is an impressive figure. In the same period, Arbitrum carried out 23.98 million transactions and Base 19.47 million transactions. But let’s look deeper.

DApp volume

DApps are like apps on your phone but run on a blockchain. They increase user engagement and transaction volumes, making them important for any blockchain ecosystem.

Over the last 30 days, that is, as of May 29, Polygon’s dApp volume reached $7.91 billion, which seems quite significant. But when you compare that to Arbitrum’s $30.42 billion and Base’s $8.64 billion, Polygon’s volume looks modest.

Moreover, although there are fewer transactions, Arbitrum’s dApp volume is much higher, and Base’s dApp volume is slightly higher than Polygon’s.

The above data shows that transactions at Arbitrum may involve larger amounts or more valuable activities, whereas Polygon may deal with smaller-scale transactions despite a higher number of transactions.

How can Polygon improve its position in the market? Faster transactions and lower fees: Polygon needs to speed up transactions and lower fees to attract more users. For example, in the last 30 days Arbitrum recorded a maximum TPS (transactions per second) of 532, which is much higher than Polygon’s 282. Additionally, Polygon’s average fee is around $0.01 per transaction, which is higher than Arbitrum’s $0.001. Reducing these fees and speeding up transactions could make Polygon more attractive.
Better staking incentives: Offering higher rewards or unique benefits for staking can encourage users to lock up their assets. Ethereum 2.0 successfully used this strategy, attracting a lot of capital. For example, ETH staking platforms such as Lido (LIDO) have seen phenomenal growth thanks to attractive liquid staking rewards.
High-demand dApps: Development of popular dApps can also bring more value to the ecosystem. DeFi applications such as decentralized exchanges (DEXs) and lending platforms can attract large amounts of locked assets. Uniswap (UNI) on Ethereum is a prominent example that increases TVL through high transaction volumes and liquidity pools.
Enhanced DeFi offerings: Offering competitive DeFi services such as lending, borrowing, and yield farming can attract users looking for high returns. Aave (AAVE) is a perfect example of a platform that has attracted billions of TVL through attractive DeFi services.
Successful upgrades: Launching upgrades similar to the Naples upgrade can improve performance and scalability. These improvements could make the platform more attractive for users to lock up their assets. Mixed feelings about Polygon: Reddit weighs in

Public sentiment on a Polygon-related thread on Reddit is mixed, reflecting a range of views, from optimism about its long-term potential to concerns about its recent performance and market position.

Despite the recent price drop, many users are confident in the future of Polygon. They see MATIC as a “sleeping giant” with strong growth potential.

For example, some users hold large amounts of MATIC, purchasing it at different price points and staking their tokens to generate passive income. Staking MATIC on-chain can yield around 3%, and some users see this as a good way to accumulate more tokens over time.

But there are concerns about Polygon’s recent performance. Some users noted that MATIC has been falling recently while other crypto assets have increased, leading to disappointment and doubt. According to some users, this decline is due to big whale investors periodically selling their assets, creating selling pressure and affecting the price of the token.

MATIC’s whaling businesses | Source: CoinMarketCap

Meanwhile, comparisons with other blockchains such as Solana (SOL) highlight new challenges for Polygon. While Solana has seen an increase in usage due to certain applications such as meme coin transactions, MATIC, Polygon’s fee token, has not found a similar retail-focused use case.

Some users also point out that MATIC’s price movement is part of the market cycle. They remind that MATIC bottomed out earlier than most other tokens in the bear market and suggest that its current performance may be just a phase.

Others believe that the market’s attention often shifts to newer projects, causing older projects to either constantly innovate or risk becoming irrelevant.

Overall, most users remain optimistic and see the current market as heralding an “altcoin season” in which alternative cryptocurrencies like MATIC could see gains. They believe that once the broader crypto market moves beyond Bitcoin (BTC) and meme coins, attention and investment may return to projects with strong fundamentals like Polygon.

What do experts think?

Expert opinions on Polygon are as varied as public sentiment. Let’s look at what some experienced analysts have to say about MATIC’s current and future prospects.

In a recent analysis on TradingView, a well-known crypto analyst named Bixley shared his bullish sentiment for Polygon. Bixley noted that MATIC price is currently in a trend line at just above $0.7. This position is very important because trend lines must be broken for a breakout to occur.

If MATIC cannot break this trend line, it could trigger a bearish decline. However, Bixley remains optimistic and predicts that MATIC will rise, leading to an upward movement in prices.

Bixley drew parallels between the price performance of MATIC and the price performance of Ethereum in its early days. If this comparison is accurate, MATIC could be poised for a significant increase.

Bixley outlined several target levels in his analysis. The initial target is $1.2, which represents a 70% upside from the current price. Other targets include $5.4, indicating a 650% increase.

MATIC prediction table | Source: TradingView

But not all experts share Bixley’s optimism. Another analyst highlighted a worrying pattern: a death cross on MATIC’s weekly chart.

A death cross where the short-term moving average crosses below the long-term average usually indicates a bearish trend. This analyst predicts a possible 70% decline that would drop MATIC’s price below $0.2.

Twitter users shared their perspectives on MATIC to add another layer to the conversation.

A tweet defended Polygon’s position despite the lack of recent gains. This user believes Polygon’s deletion due to its current performance ignores its long-term potential.

So you’re telling me that Polygon is dead because MATIC doesn’t pump this loop.

Let me tell you you have no idea what you’re talking about pic.twitter.com/ozCTRZaljt

— Leon Stern (@0xlstern) April 25, 2024

Another tweet raised the possibility that we might see some altcoins being phased out. Historically, it seems that with each market cycle some coins rise dramatically and then fizzle out, never reaching all-time highs again.

Is it possible that we will already see certain cryptocurrencies being phased out?

Every cycle, we see cryptocurrencies that go on a strong rise and then never produce a new ATH again.

The only thing that cannot be doubted during this cycle is its strength. $BTC. Then we have a powerful alternative… pic.twitter.com/OGzoySztEt

— Cold Blooded Shiller (@ColdBloodShill) April 28, 2024

As always in the crypto world, you should weigh these different perspectives and make informed decisions based on the most comprehensive data available. Remember to never invest more than you can afford to lose.