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Polygon (MATIC) well placed in spite of SEC crackdown

Tracking Polygon ecosystem

16 June 2023

Hello,

Okay, not much to cheer this week. Bitcoin is trading just above $25,000 while altcoins continue to bleed against it. This comes even as the US Fed paused interest rate hikes – that was supposed to be a big catalyst for the next rally, wasn’t it? Markets rather reacted opposite as indications of future rate hikes this year dampened the mood.

Against this backdrop, today we cover the Polygon ecosystem and its native token MATIC. For the longest of time this bear market, MATIC held its own against BTC. But SEC’s lawsuit last week that clarified the token as a security has made it lose value rather quickly. The token has lost more than 30% value in the past 10 days and is fighting to stay above $0.6 currently. What’s the future for Polygon?

Top-3 stories of the week:

1

with the United States Securities and Exchange Commission. The investment firm joins a long line of applicants; ARK is among those still waiting to hear from the SEC, and Grayscale has appealed its rejection.

2

, less than a week after U.S. authorities took their most drastic actions to date against the digital assets market. Also, in the spring of 2023, the business will host its second Crypto Startup School in London, and it will collaborate with blockchain clubs.

3

, UBS has been expanding its tokenization across structured products, fixed income and repo financing. The firm issued a $50 million tokenized fixed-rate note in December 2022 under English and Swiss law, digitized on a permissioned blockchain.

The newsletter is put together by Giottus Crypto Platform and The News Minute’s Brand Studio. You can read all the previous issues of Cryptogram here.

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WEEKLY MACROS

  • Total crypto market cap - $1.03 trillion - DOWN 6.8%

  • Bitcoin price - $25,519 - DOWN 3.8%

  • The dollar index (DXY) - 102.24 - DOWN 1.1%

  • Bitcoin Dominance - 47.8% - UP 2.5%

  • Crypto Fear and Greed Index - 47 - the market is in neutral condition

ICO CALENDAR

THE HOT TAKE

Can MATIC rebound after this hit?

US SEC’s recent crusade against the crypto market has now shifted investor attention from exchanges to key altcoins. MATIC, SOL, ADA, FIL, ATOM, SAND, MANA, and ALGO have been classified as unregistered security by the SEC in accordance with the Howey Test. This led to a steep decline for most altcoins. MATIC, in particular, declined from $0.9 to $0.55 in a matter of days before regaining some value.

We have been fond of MATIC in the past. Today we analyse what factors can lead to its recovery in the mid- to long-term.

1) US is not a key market for Polygon

While US drives a lot of short-term sentiment in the crypto market, Polygon investors can breathe easy as the ecosystem is not really dependent on the US market for its growth. Polygon was developed by Indian founders and has scaled well in emerging markets.

In fact, they just tweeted the same! Polygon Labs released an

where they claimed that the network “was developed outside the US, deployed outside the US.” The company emphasized that its primary focus lies outside the US.

Source: Twitter

We like the confidence shown by the team.

2) Polygon 2.0 is on the cards

Polygon labs and their ecosystem partners have recently unveiled their upcoming project known as Polygon 2.0. Without going into the details, they are laying claim to the “value layer” of the internet — a concept that nearly all blockchains aspire to achieve, including Ethereum. Their

envisions an audacious goal to build the value layer of the internet that will allow anyone to create, exchange and program value. All key dates for this initiative are immediate indicating that they have already began developing the idea.

Source: Polygon

If they succeed in doing this, they will likely gain a fair advantage in the crypto landscape and also change every aspect of Polygon, from protocol architecture to tokenomics to governance.

3) Long-term owners are holding steady

MATIC long-term holder count has remained stable despite this volatility. This suggests high confidence among investors in the Polygon ecosystem. This means that further downside risk is limited for the token – any price range below $0.5 may be great for long-term accumulation of the asset.

MATIC long-term holders are holding fort

Source: IntotheBlock

4) MATIC can be thought of as 2019’s Ethereum

What did Ethereum (ETH) do in 2019? (the year before the last halving). It dropped 90% in value over one year (Jan’18 to Jan’19) from $1,400 to $140. Eventually, it went on to create new highs and is currently trading above $1,640.

ETH – price action in 2018-19

Source: Coinmarketcap

MATIC has so far dropped ~75% from its all-time-high this cycle. Can MATIC match ETH’s resilience this year and beyond? We believe it can, given its use cases and strength of development.

Key takeaway

Even if the SEC is able to win its lawsuits versus Binance and Coinbase, legitimizing its claim that MATIC is a security, MATIC will likely recover in value with time. Investors can look at allocating a portion of portfolio to the asset in the $0.3-0.5 price range for long-term value.

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If you have any questions or feedback for us, write to us at [email protected]. You can check out the previous issues here.