🌎 Polygon Faces Price Decline Amid Intense Layer-2 Competition

Polygon Price Trends Downward Amidst Rising Competition

The price of Polygon (MATIC) has been on a downward trend over the past few months, reflecting a loss of market share in the layer-2 industry. On Friday, MATIC dropped to a key support level at $0.4343, recovering slightly since then. However, it remains approximately 60% below its highest point this year and 82% below its all-time high.

Increasing Competition in the Layer-2 Industry

Polygon, a leading player in the layer-2 industry, has faced increasing competition over the past few years. The total value locked (TVL) in its DeFi ecosystem has decreased significantly, from a peak of nearly $10 billion to $872 million. In MATIC terms, the TVL has fallen from 5.7 billion to 1.78 billion.

Other layer-2 networks, such as Arbitrum, have gained traction, attracting 661 DeFi developers and locking in over $3 billion in assets. Similarly, Base and Blast have amassed $1.4 billion and $1.2 billion in assets, respectively. Optimism has also captured some of Polygon’s market share. This heightened competition is a key factor behind MATIC’s 82% decline from its all-time high.

On-Chain Metrics Show Promise

Despite these challenges, Polygon’s on-chain metrics offer some encouraging signs. The network boasts over 1.09 million addresses, making it the second-largest chain after Tron, which has 2.09 million addresses. Additionally, the number of daily transactions on the network has remained stable, exceeding 3.8 million since March 11th this year.

The volume of stablecoins on Polygon has also shown a strong upward trend since October of last year. The volume has increased from 1.17 billion MATIC to over 1.8 billion. Stablecoins play a crucial role in blockchain ecosystems, facilitating the majority of transactions.

Moreover, Polygon offers a higher staking yield compared to many other cryptocurrencies. Its staking yield stands at 5.67%, which is higher than Ethereum’s 3.29% and Cardano’s 2.9%.

Polygon Price Loses Key Support

Despite these positive metrics, the price of Polygon has experienced a sharp decline in recent weeks. It has fallen below a critical support level, potentially invalidating a double-bottom pattern that was forming. The price dropped below $0.50, a level it had held in June and October 2023. Unless this decline is a false breakdown, Polygon may continue to fall, potentially reaching the next support level at $0.3206, its lowest point in June 2022, which is 37% below the current level.