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The 10th largest cryptocurrency with a market cap of $9.2 billion, Polygon (MATIC), is up 1.8% in the past 24 hours and is now exchanging hands at $0.998 while managing $382.3 mln in trading volume, according to CoinGecko.
Compared to other crypto assets, MATIC's price is only down 65.8% from its all-time high (ATH) of $2.92 hit in late Dec. 2021. The crypto is also up 30% year-to-date (YTD) in 2023.
MATIC has a green start to May after an extended period of downturn, but why exactly? Let's take a look!
Ever since the Shappela Upgrade marked the completion of Ethereum's transition to ETH 2.0 Proof of Stake (PoS), which increased Ethereum throughput and reduced energy demands by 99%, there has been some drop in Polygon's popularity with fear of MATIC obsolescence spreading.
Formerly called Matic Network, Polygon (MATIC) is a scaling solution for Ethereum using sidechains, so it makes sense that if Eth is able to achieve scalability, Matic's usage could drop.
According to on-chain data, investors and network participants in the Polygon ecosystem seem to be losing confidence, with the Weighted Sentiment trending negative shortly after the completion of the Shapella Upgrade on April 12. Since then, the MATIC Weighted Sentiment has dropped almost 150% to -0.45.
The Weighted Sentiment metric is used to evaluate the market perception of a project by comparing the ratio of positive mentions to the negatives. When this metric remains negative for extended periods, it shows that investors are growing concerned about a project's long-term viability.
This means the Polygon team has to expand and launch new unique product offerings or community campaigns to rekindle investor interest.
Updates to the PolygonID Identity Infrastructure tools
The India-based project was launched by Jaynti Kanani, Sandeep Nailwal, and Anurag Arjun in 2017. According to CrunchBase, billionaire entrepreneur Mark Cuban and Coinbase Ventures are investors in Polygon. MATIC is the native token of the Polygon network used to participate in its proof-of-stake (PoS) consensus and pay transaction fees on the network.
On Wednesday, the Polygon team announced three updates to the PolygonID Identity Infrastructure tools to make it easier for devs to integrate decentralized identity into dApps.
One of the benefits includes better integration with existing tools and projects. With the SelectiveDisclosure feature, developers can now share selected fields from a credential to implement new use cases.
Furthermore, the new JS SDK enables developers to create identity clients on multiple devices, such as web wallets and browser extensions. This SDK also includes credential issuance capabilities to allow for serverless issuance from local devices.
The protocol has also made major improvements to the user experience through a new issuer node UI. This makes setting up, managing, and working with the issuer node easier. On the end-user front, push notifications are now supported in the mobile SDK and the Polygon ID Wallet.
New tools for developers have been introduced in the form of JWZ Validator, Polygon ID smart contracts deployed on POS Mainnet, Android & React versions of the mobile SDK, and DID registered in The World Wide Web Consortium (W3C).
Last week, Polygon also outlined the impressive performance of its zkEVM platform. As of April 24, the number of transactions and unique active wallet addresses on Polygon zkEVM Mainnet Beta surged 300% to reach 50,000 and 168,000, respectively. These transactions generated $177,000, or 95.25 ETH in fees, while the average daily gas fee (in gwei) showed that Polygon zkEVM Mainnet Beta was seven times cheaper than Ethereum Mainnet during the same period.
What Does On-chain Data Suggest?
May is surely looking up for MATIC price as it enters the green zone after remaining bearish for most of the 2023 first quarter, which continued in April too. But now the price is showing some resilience while the market experiences bearish sentiments amidst the “Sell in May” narrative.
Technically, the price of MATIC is currently trading below the 200-day Exponential Moving Average (EMA), currently trending at $1.052. The bulls are moving to test that area acting as immediate resistance, and a break above this level may see bulls going for the next available resistance.
However, when it comes to Polygon's on-chain data, its rising Network Valuation to Transaction Volumes (NVT) ratio suggests impending bearish pressure for MATIC price.
The NVT ratio compares the number of transactions of a coin on a given day to its market valuation. This metric is used to assess the level of activity on the network and its adoption.
The higher the NVT ratio, the higher the network valuation relative to its underlying transaction volume, which could indicate investors are pricing the project at a premium, basically an overvalued network.
MATIC has lost fundamental traction since mid-April, with its NVT ratio soaring nearly 630% from 41.28 to 298.74 between April 11 and May 1. This significant surge adds to the growing bearish concerns among Polygon investors.
As for the key price level, 6,000 addresses bought 170 million MATIC coins for a minimum price of $0.95, while 31,000 addresses are holding 630 million coins at the $0.91 level, according to IntoTheBlock's In/Out of Money Around Price (IOMAP) indicator. Meanwhile, 13,000 wallet addresses are holding 4.08 billion coins at $1.
Amidst all this, Polygon noted a surge in a key metric indicating increased network usage. According to Artemis, gas usage in Polygon spiked over the last week. In turn, more fees and revenue were generated by the network. Most of this gas usage was coming from DeFi applications, with XEN being the main player, followed by Matcha, Aave, Balancer, and others.
Polygon's TVL, however, continues to remain around $1 billion this year, down from nearly $10 bln at its peak in June 2021, as per DeFi Llama. A similar declining trend can also be noted in the number of transactions on Polygon's DeFi ecosystem.
Polygon's NFT space has also been witnessing a decline over the past week. However, the announcement of the launch of the first NFT collection on the zkEVM mainnet may help reverse this trend.
A New Round of Partnerships
While MATIC prices struggle amidst the broad down market, investment giant Franklin Templeton recently said that its blockchain-run mutual fund is now supported on the Ethereum layer-2 scaling solution.
Franklin is a $1.4 trillion asset manager who has launched the first US-registered mutual fund called OnChain U.S. Government Money Fund (FOBXX), which uses a public blockchain to execute transactions and record share ownership. The fund, which primarily invests in government securities, cash, and repurchase agreements, has surpassed $272 million in assets under management (AUM).
“Franklin Templeton continues to see operational efficiencies through the use of a blockchain-integrated system, including increased security, faster transaction processing, and reduced costs, benefiting Fund shareholders,” said Roger Bayston, the head of digital assets at the investment manager. He further noted that the firm is also tapping into the Ethereum ecosystem to explore opportunities to benefit its investors.
But this is not all for Polygon. Last week, Google Cloud and MATIC developer Polygon Labs teamed up for a new initiative to make it easier for developers to build, launch, and grow Web3 products and decentralized applications (dApps) on the protocols built on Polygon.
This multi-year strategic alliance between Google Cloud and Polygon Labs was announced at the Consensus 2023. This alliance will accelerate the adoption of core Polygon protocols, including Polygon zkEVM, Polygon PoS (point of sale), and Polygon Supernets, with the enterprise infrastructure and developer tools of Google Cloud.
Under the new agreement, Google Gloud will bring its fully managed node hosting service Blockchain Node Engine to the Polygon ecosystem, meaning developers will no longer need to configure or run their nodes. The development will also diversify cloud services across the Polygon network.
The collaboration is expected to increase transaction throughput by enabling use cases in DeFi, gaming, and supply chain on the layer 2 networks.
This week, the sports publication outlet Sports Illustrated also stated that it would be launching its NFT ticketing platform on the Polygon network. The self-service event management and primary ticketing solution dubbed Box Office by SI Tickets was floated through its SI Tickets unit and in conjunction with ConsenSys.
In a whirlwind of updates and collaborations, Polygon (MATIC) shows signs of life as it kicks off May with a 1.8% price increase after a prolonged downturn.
As Ethereum's transition to ETH 2.0 stirs concerns about MATIC's relevance, the Polygon team is actively working to rekindle investor interest by enhancing its identity infrastructure tools, revealing zkEVM's impressive performance, and partnering with giants like Franklin Templeton and Google Cloud.
With May's “Sell in May” narrative in the background, MATIC's price now tests the 200-day EMA, offering a glimmer of hope amidst bearish sentiments. As Polygon continues to innovate and forge partnerships, the crypto community eagerly awaits its next move in the ever-evolving world of decentralized finance and technology.
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Gaurav started trading cryptocurrencies in 2017 and has fallen in love with the crypto space ever since. His interest in everything crypto turned him into a writer specializing in cryptocurrencies and blockchain. Soon he found himself working with crypto companies and media outlets. He is also a big-time Batman fan.