Polygon (MATIC), a popular Layer-2 (L2) scaling solution for Ethereum, has seen its price drop to its lowest level since July 2022. The network has been losing users and investors to newer and more innovative L2 networks, such as Optimism, Arbitrum, and Base.
Polygon’s Numbers Showcase the Need for Desperate Measures
According to GlassNode, Polygon’s network growth has stagnated in the second half of 2023, as the number of new addresses registered on the network has fallen to a two-year low. Meanwhile, alternative L2 networks have been attracting more users and developers with their faster and cheaper transactions.
The decline in Polygon’s network activity has also affected its native cryptocurrency price, which has slid below $0.55, a 26% decrease since the start of the year. The on-chain data shows that 95% of current MATIC holders are in losses, and many of them are moving their tokens to exchanges, indicating a potential sell-off.
Polygon’s team has tried to revive the network by announcing a new CEO and a new native token called POL, which will replace MATIC. However, these moves have not been enough to stop the bleeding, as MATIC’s price continues to trend downward.
Polygon faces significant challenges in competing with newer L2 networks, which have more advanced features and stronger partnerships. For example, Optimism has integrated with Uniswap, the largest decentralized exchange on Ethereum, while Arbitrum has secured funding from Coinbase Ventures, one of the most influential crypto investors.
Polygon needs to act fast to regain its momentum and market share, or else it risks becoming obsolete in the rapidly evolving L2 space. The network’s fate may depend on the successful launch of Polygon 2.0 and the POL tokenomics, which are expected to improve the network’s security and scalability.
The on-chain data shows that MATIC holders are moving their tokens to exchanges, indicating a potential sell-off shortly. This is a worrisome sign, as the last time MATIC had a high exchange netflow of 23.42 million on July 17, it was followed by a 15% price drop by the end of that month.