Is Polygon (MATIC) Still Underrated Compared to Other Cryptos?

This all suggests that now is a very good time to buy polygon (MATIC), not least because it has recently announced a number of new — and big — partnerships. At the same time, it has (like much of the rest of the market) suffered a gradual decline since May, when it reached its current all-time high of $2.62. This means it’s arguably underpriced, and by extension awaiting a significant recovery.

However, as a layer-two scaling solution for Ethereum, would-be investors need to be mindful that the latter’s eventual transition to Ethereum 2.0 and proof-of-stake may make Polygon somewhat less necessary. That said, its founders and community argue that it will be needed even with the arrival of Ethereum 2.0, particularly if Ethereum is going to make good on its aims of becoming a global settlement layer.

Here’s Why Polygon (MATIC) is Looking Bullish

MATIC hasn’t had a great month. At $1.09 (as of writing), it’s down by around 20% in the past 30 days, as well as by 58% since the ATH of $2.62 it set on May 18. Its decline over the past month puts it in the bottom half of the top-50 coins in terms of performance during this period, as well as in the bottom half over the past 90 days.

That said, it is the third-best-performing coin over the last 12 months, behind only Dogecoin (DOGE) and Terra (LUNA). This speaks to its potential as a relatively new cryptocurrency, as well as a second-layer scaling platform that’s compatible with Ethereum.

Source: Blockchaincenter.net

Despite having a relatively rough time since its May all-time high, polygon has had something of a resurgence more recently. Since hitting a six-month low of $0.698 on July 21 (when the entire cryptocurrency market fell to a total value of $1.25 trillion), it has risen by 56%.

In fact, it has risen by 5% in the past seven days, and there are a number of reasons for why it has enjoyed a rejuvenation of sorts in the last few weeks. Most notably, it gained significant momentum after Coinbase announced (on August 31) it was turning to Polygon as its first scaling solution for Ethereum.

Source: Twitter

The market took this announcement from Coinbase as a massive seal of approval for Polygon, with MATIC shooting up from about $1.32 to a three-month high of $1.78 by September 5, representing an increase of 34.8%.

MATIC over the past six months. 30-day moving average (green), 200-day (yellow), relative strength index (purple). Source: TradingView

MATIC did subside from this short-term high, but it continues to welcome encouraging news.

For one, it has announced other partnerships recently, with its deal with professional services firm EY to collaborate on “building Ethereum scaling and enterprise solutions” being one of the most notable.

Source: Twitter

More generally, Polygon’s platform has been enjoying some substantial growth in recent weeks. It recently boasted having overtaken Ethereum in terms of daily active addresses, the first time it has ever done so.

Source: Twitter

Its platform has been witnessing consistent growth for several months now, with its most recent update showing that its daily active users had grown by 17% in a week (between September 17 and 24). It has also been doing a very good job of retaining users, something which will be vital in ensuring sustainable growth.

Given such growth, Polygon now accounts for some $4 billion in total value locked in, which is a 3,900% increase from the $100m it had locked in at the start of April. This suggests that the future looks fairly bright for the platform, and that MATIC should continue to see increases over the medium-to-long term. And with the coin arguably underpriced right now, it does indeed seem like a good time to buy MATIC.

But What About Ethereum 2.0?

One potential problem for Polygon, however, is the approach of Ethereum 2.0, which will shift Ethereum to a proof-of-stake mechanism and make it more scalable. And because it will be more scalable, it has got at least some people worried that it won’t need layer-two scaling solutions such as Polygon.

However, Polygon co-founder Jaynti Kanani has argued in interviews that proof-of-stake won’t solve Ethereum’s scaling problems, while Etherum 2.0 won’t make the platform “infinitely” scalable. Instead, it will still have a limited (if increased) capacity, and it will still need layer-two solutions such as Polygon.

“Two years back, Ethereum was making thousands of transactions per day. Currently it’s making 1.5 million transactions per day, and Polygon is making 7 million transactions per day. If you see Binance [which is proof-of-stake], it was making like 12 million transactions per day before it got problems. If the crypto market expands, it [Ethereum 2.0] will need more transactions per day […] I’m a hundred percent sure it [Ethereum 2.0] will get jammed in a few days or weeks,” he told Laura Shin’s Unchained podcast in June.

Basically, Ethereum is positioning itself to become “the global settlement layer,” but even if it successfully transitions to Ethereum 2.0, it still may not be scalable enough to handle the entire world’s crypto-based transactions by itself. And while Vitalik Buterin has said it’s aiming for an eventual maximum of 100,000 transactions per second (which would work out at about 8.6 billion per day, much more than the 8 million the entire cryptocurrency ecosystem handles currently), this is a hypothetical best-case ceiling, and may take some time to be achieved (if achieved at all). Also, it involves the use of rollups, another second-layer solution that would imply continuing relevance for Polygon.

In other words, while there is a chance that Ethereum 2.0 may one day make Polygon redundant, this outcome remains very remote. Which means that MATIC will be a good investment for at least a while yet.