The year 2022 saw the value of Polygon’s native token MATIC drop by 64%. But the network started this year on a positive note, with the price shooting up 8% according to the charts. However, can MATIC maintain this momentum?
On-Chain Developments To Play A Big Role For MATIC
The Layer 2 ecosystem has been seeing on-chain developments grow. Just before the turn of the new year, Polygon’s first prediction market Bhavish Finance made several records that brought Polygon in the spotlight. Uniswap, a decentralized exchange in the ecosystem, ended 2022 with a $28 billion annual volume.
The DEX surprisingly accomplished that with a sub-$100 million TVL, but as of writing Uniswap’s TVL on Polygon is at $111.21 million, according to the DEX’s public dashboard.
Chart: Uniswap.org
These bullish developments, however, are preceded by big news on Polygon’s NFT arm. DeGods and y00ts, two of the biggest names on Solana, will bridge their collections on Polygon and Ethereum on Q1 of 2023.
This would inevitably bring interest on Polygon’s NFT market, pushing the price of MATIC upwards. However, with the nearing timeline of the ‘Shanghai’ network upgrade of Ethereum, Polygon’s main offering, which are low gas fees due to a better roll-up protocol, will be challenged.
With this in mind, it remains to be seen what developments on-chain would differentiate Polygon with Ethereum’s upgrade and other L2 protocols.
Crypto FUD Will Strengthen Bears Long-Term
The crypto market has definitely suffered from last year’s big collapses. But the FUD (fear, uncertainty and doubt) that came about these events might be strengthened as Huobi, a centralized exchange, seems to be melting down in real time.
Recent news shows that the CEX will be laying off 20% of its employees. Tweets about Huobi’s situation show that Justin Sun, the touted shadow owner of Huobi, has been converting billions of his crypto to fiat on Binance.
MATIC total market cap at $7 billion on the daily chart | Chart: TradingView.com
The exchange itself is also observed to have increased withdrawals in the past couple of days. This led to some speculation that the exchange could be the next FTX. Any negative development here would affect Polygon as insolvency news hit the crypto markets particularly hard.
🟡 What could happen to Huobi?
– Huobi has $80m(4%) outflow in the past 24H, and $133m(7%) in 7D VS their $2B clean assets
– Could halt withdrawals and activities if situation gets out of proportion
– Risk-averse thing to do right now is to withdraw and self-custody— Rock 🪨 (@DataaRocks) January 6, 2023
Short- to mid-term however, MATIC has some room to grow as the current support at $0.7538 proves to be a barrier for the bears.
Previous bullish on-chain developments also help investor sentiment to remain positive. But with the token’s strong correlation with ETH, negative macros could pull the king of altcoins down along with MATIC.
Investors and traders should target $0.8106 price resistance to continue the bullishness of MATIC.
-Featured Image: The Daily Hodl