Polygon has been one of the most popular projects in the Ethereum ecosystem, but now thigs are looking rough for the project.
Polygon (MATIC), the Ethereum (ETH) scaling solution taking the crypto world by storm, has suddenly hit a rough patch.
After soaring to a 90-day high of $1.56 on Feb. 18, the native token MATIC has taken a 13.5% nosedive, sitting at $1.35 as of Feb. 22.
To make matters worse, the company announced on Feb. 21 a 20% layoff of its workforce. As per the statement, the company’s reserves stand at more than $250 million and about $1.9 billion in BTC, indicating a sound treasury.
What does this mean for Polygon and its native token MATIC?
We’ve got the lowdown on Polygon’s market action and on-chain metrics, so you can make sense of this rollercoaster ride and assess what’s next for this game-changing project.
What’s happening with Polygon?
Despite the cryptocurrency industry’s rough ride in 2022, Polygon Labs secured a massive $450 million in its first major financing round led by Tiger Global and SoftBank in 2022.
Fast forward to the last quarter of 2022, and Polygon experienced a surge in user activity, recording an impressive 262.47 million completed transactions, according to Messari. However, the collapse of FTX caused the platform’s revenue to take a hit.
Despite this setback, data from DeFi Llama shows that the total-value-locked (TVL) on Polygon has risen since Jan. 1, increasing by nearly 18% to reach $1.17 billion as of Feb. 22.
Meanwhile, Polygon’s saga continues to unfold as it prepares to launch the zkEVM mainnet beta on Mar. 27, which is expected to increase network throughput and reduce gas prices significantly.
With these developments, it’s worth exploring how they have affected the on-chain metrics of Polygon.
Polygon on-chain analysis
Number of addresses
According to Santiment, the number of addresses holding 10,000-100,000 MATIC has increased by 39%, from 364 to 507, since November 2022.
Meanwhile, the number of addresses holding 100,000-1,000,000 MATIC has seen a whopping 60% increase, from 3760 to 6020.
In short, the increasing number of whale addresses holding MATIC indicates that the token is gaining traction in the crypto world. As more investors jump on board, the demand for the token increases, resulting in a surge in price.
Stock-to-flow (S2F) ratio
For those unfamiliar with the term, stock to flow (S2F) ratio is a measure used to evaluate the scarcity of an asset.
It is calculated by dividing the total supply of a given asset by the amount produced or “flow” each year. The higher the ratio, the scarcer the asset, and the more likely it is to appreciate.
MATIC’s S2F ratio, which stands at 30.47 as of Feb. 22, has risen since the start of 2023. This is due to several factors, including the growing popularity of the Polygon Network, the increasing number of decentralized applications (dapps) being built on the platform, and the expansion of its ecosystem.
So, what does this mean for the future of MATIC? As history indicates, a rising stock-to-flow ratio is typically a bullish sign of an asset’s price. As the token becomes scarcer, it becomes more valuable, and investors are willing to pay a premium.
Suppose MATIC continues to experience strong demand and the S2F ratio rises. In that case, the platform could become an even more attractive choice for investors—a trend that could lead to additional gains.
Mean coin age
Mean coin age is a key metric in the crypto world that reflects how much investors are hodling. A higher mean coin age means more people are holding onto their coins, reducing the supply and driving up demand, ultimately raising the price.
As per Santiment data, MATIC’s mean coin age has been on the rise for 90, 180, and 365-day time frames since November 2022.
With the current market volatility, a rising mean age could suggest that MATIC holders are confident in the project’s fundamentals and prospects and are not swayed by short-term price fluctuations.
In other words, the increasing coin age of MATIC is a promising signal of the community’s trust in the project’s growth and long-term sustainability.
MATIC price prediction
According to the popular pseudonymous cryptocurrency analyst Pentoshi, MATIC could be on the verge of making a new all-time high ahead of the upcoming ZkEVM upgrade.
He reckons that MATIC’s strength during the bear market was commendable. Furthermore, the launch of the upcoming zkEVM mainnet is a major catalyst for a bullish MATIC run.
Meanwhile, CoinCodex, a crypto data website, has strongly recommended MATIC in their choice of best coins for February. They have even predicted that MATIC’s price can spike more than 50% from its current levels and reach $2.06 by Mar. 20.
In line with CoinCodex, Digital Coin, an algorithmic forecasting website, has predicted that MATIC will continue to surge. It predicts that the average price will reach $2.9 this year.
Remember that price predictions are based on the current market and technical sentiments, which may change overnight. Hence, exercising caution when investing in crypto assets is always in your best interest. Never invest more than you can afford to lose.
The road ahead
Polygon has emerged as a standout project in the rapidly-evolving world of cryptocurrencies thanks to its impressive network growth and partnerships with major brands.
As we look into 2023, Polygon could become one of the top gainers. However, investors should always exercise caution, as the crypto market is notoriously volatile.
While MATIC’s price may see sharp fluctuations in the short term, the project’s long-term potential looks stable.
All in all, Polygon is a fascinating project that promises to deliver many exciting developments in the coming years. As a market watcher and observer, you should closely monitor its progress.
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