MATIC Faces 10.6% Dip Amid Challenging Times for Polygon Amid Network Upgrades and Founders' Departure
Summary:
MATIC, Polygon's native token, saw a 16.4% blow-up following the launch of the Polygon 2.0 Goreli testnet in October, which was swiftly dwarfed by a 10.6% slump influenced by factors like core founders leaving and weak activity on the network's ZK rollup subnet. Despite the early promise of Polygon’s layer-2 scaling solution announced in 2023, the network is lagging behind competitors in terms of active addresses and daily transactions. The departure of co-founder Jaynti Kanani amidst critical network upgrades and escalating competition from other scaling solutions have contributed to the recent decrease in the network's active users. The continual improvements and updates to Polygon 2.0 could turn the tables and investors are encouraged to follow its progress closely.
MATIC, the native token of Polygon, rallied up by 16.4% concurrent with the unveiling of Polygon 2.0 Goreli testnet on October 4. However, the anticipated resistance at $0.60 turned out stronger than predicted, resulting in a 10.6% dip over the six-day period to October 10. This dip was set off by multiple factors such as the exit of a primary founder and decreased activity on Polygon’s ZK rollup subnet.
The initial price surge of MATIC has been declined, erasing the initial growth resulting from hopes of protocol upgrades. Price surges usually follow updates and mainnet launches. Polygon 2.0, a network of layer-2 chains consolidated through a cross-chain coordination protocol, was announced in June 2023. It offers a scalable ecosystem with four layers: staking, execution, interoperability, and proving. Each layer plays a significant role in forming a web of chains for secure, instant, and affordable transfers.
Polygon 2.0 amplifies security and privacy via ZK proofs, full compatibility with Ethereum's Virtual Machine (EVM) alongside accelerated cross-chain transactions. Additionally, the project is advancing its ZK-STARK-supported layer-2 solution, Miden.
The recent 10.6% fallback could be viewed as just market correction from the hype of the testnet launch. However, other elements may have influenced investors' negative outlook towards Polygon. For instance, Polygon’s ZK subnet, zkEVM, has not showcased as much activity and deposits as competitors.
According to Artemis, an on-chain data source, Polygon zkEVM’s active addresses, 6,210, are significantly lesser than StarkNet’s 154,390 and zkSync ERA’s 239,810. Furthermore, in terms of daily transactions, Polygon’s zero-knowledge rollup also trails its rivals.
The aggregate of transactions, as well as deposits on Polygon, also do not render optimal results with a total value locked (TVL) amount of $756 million, which is less than half of Arbitrum's layer-2 scaling solution.
Despite Polygon's early launch in June 2020, it is now facing robust competition from Optimism (OP), and Base. Moreover, the exit of co-founder, Jaynti Kanani, after serving six years, caused unease among investors, particularly because of its timing when the project is nearing its multiple-layer scalability solution.
The number of active users interacting with Polygon network’s decentralized applications also impacted MATIC’s performance, which saw a decline.
Over the past 30 days, there has been a 17% drop in active users for the top 12 Dapps on the Polygon network. This decline profoundly impacted the NFT and decentralized finance (DeFi) markets, negatively affecting applications like Uniswap, OpenSea, and Move Stake.
Despite the surge in MATIC's token earlier in October, the recent 10.6% fall can be attributed to lessening network activity, the exit of a key founder during a critical upgrade, and increasing competition from other ZK scaling solutions. There is a considerable amount of bearish news flow that justifies this correction. Notwithstanding, the team continues to bring necessary updates and improvements to the Polygon network. Investors should keenly observe the project's progress in maneuvering these challenges and leveraging the upgrades of Polygon 2.0.
Published At
10/10/2023 6:06:24 PM
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