Most major cryptocurrencies continue to struggle after the big sell-off in late November and early December, but not Polygon (CCC:MATIC-USD). The token is up more than 50% in the past month and trading near its all-time highs, while Bitcoin (CCC:BTC-USD) is down 12% and Ethereum (CCC:ETH-USD) is down 5%.
You could say Polygon has been resilient during this recent market maelstrom. Chalk it up to a spate of positive developments. But what’s more important for investors today is whether it can make its way to higher prices.
Given how Polygon’s star has risen, it should be able to hold onto its recent gains. But taking into account the current crypto market environment, holding steady may be the best traders can hope for near term. But even if MATIC remains rangebound in the months ahead, long-term investors could see their patience rewarded.
Why Polygon Has Outperformed its Peers
Why have omicron variant fears and the specter of more hawkish Federal Reserve policy put pressure on Bitcoin, Ethereum and “Ethereum killers,” but not on MATIC?
As I said above, this is due to several positive developments for this token’s network, Polygon. Over the past few weeks, we’ve seen scores of headlines that bode well for its platform of Layer-2 scaling solutions. These news items include potentially game-changing partnerships, a rumored investment in the platform by several venture capital firms, and continued reports of it offering developers a workaround to the scaling issues that still plague the Ethereum network.
All of this points to increased usage of Polygon’s platforms, in turn justifying a higher valuation for MATIC. As a Seeking Alpha commentator discussed earlier this month, its market capitalization is much smaller than Solana (CCC:SOL-USD) and Cardano (CCC:ADA-USD). Per the commentator’s view, this wide discrepancy makes little sense given Polygon’s potential to catch up to both platforms.
Even after MATIC’s run-up and the pullback in SOL and ADA since the publication of that article, this discrepancy remains. At current prices, MATIC has a $19 billion market cap, while the two “Ethereum killers” have market caps of $58.4 billion and $49.3 billion, respectively. While this factor alone points to a swift two- or three-fold jump, keep one thing in mind: Given the current crypto market environment, it may take time for this to happen.
Another Big Run-Up May Take Time
Based on the abovementioned factors, going long MATIC today may seem like a slam-dunk path to profits. It has all the ingredients in place to see another breakout in price. But that doesn’t mean it’ll occur over the next few months. The crypto market meltdown could carry on for some time.
True, MATIC has stayed on an upward trajectory, despite some wild swings, largely thanks to the flood of positive Polygon news I just discussed. But a slowdown in the positive news flow or more downward pressure on cryptos caused by a cycling out of risky assets following the Fed’s monetary tightening could send MATIC back under $1.50 instead of heading to $2.75, $3, or even $4 per token.
This would be bad news for traders approaching the token as a short-term play. However, if you’re looking at it as a long-term bet, now may be the time to buy. Once enthusiasm returns to the crypto market, this token could continue to rise, bridging the valuation gap between it and “Ethereum killer” frontrunners like Cardano and Solana.
Polygon Verdict: Consider It Another High-Quality Crypto
Admittedly, I’m on the fence about whether “this time is different” for crypto or it’s just the latest bubble set to continue deflating much like what happened to internet stocks in the years after the dot-com crash. However, if you think otherwise, this may be a great opportunity. With its many strengths, Polygon stands to rise to a valuation on par with other top altcoins.
If you’re bullish on crypto’s future, consider Polygon another high-quality play. Just keep in mind that the market’s latest round of fear, uncertainty and doubt could delay its next big move higher.
On the date of publication, Thomas Niel held LONG positions in Bitcoin and Ethereum. He did not hold any of the other securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Thomas Niel, contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016.