- Polygon (MATIC-USD) is on the rebound after bottoming out in late February; MATIC is now up 27.7%.
- The Ethereum (ETH-USD)-based crypto, which uses proof-of-stake (PoS) validation, is gaining popularitydue to its lower fees compared to ETH.
- Investors can expect that popular apps, NFT trading sites, and trading exchanges built on Polygon will continue to help push MATIC crypto higher.
Polygon is making a comeback after hitting a low of $1.2842 on Feb. 24. MATIC crypto tokens are now up 27.7% at $1.64 as of March 29.
Nevertheless, the cryptocurrency is still well off of its highs and investors may be wondering when it will retake those heights. For example, at the end of the year, Polygon was at $2.5814.
That puts its year-to-date (YTD) performance at -34.5%. Another way to look at this situation is that MATIC crypto will have to rise by 57.4% from today’s price just to break even with last year.
Given the popularity of the apps that are built on Polygon, it looks like there is a good chance that Polygon can make that rebound.
Where Things Stand With Polygon
There are several reasons that make Polygon, built on the Ethereum blockchain platform, so popular. It is designed to exceed Ethereum in terms of transaction speed, throughput, and gas fees, according to Cryptopotato online magazine.
Originally, Ethereum was seen as the “go-to” ecosystem to build and launch dApps (decentralized applications). However, the network quickly clogged and Ethereum’s throughput significantly downgraded. As a result, Ethereum’s gas fees rose and it became too expensive for smaller players and consumers.
As a result, four software engineers decided to build Polygon as an alternative. According to Cryptopotato, Polygon allows you to do pretty much everything you do on Ethereum — without the high gas fees or the low throughput.
As a result, a number of very popular dApps use Polygon as their main blockchain platform. For example, two popular yield-generating dApps that use Polygon are Aave and Curve Finance. Aave claims to have over $21.7 billion in deposits and money deposited on its site to earn interest. Curve Finance is at $19.9 billion.
Moreover, defiLlama.com reports that there is a total of $4.16 billion in Total Value Locked (TVL) directly tied up with Polygon. That represents about 32.3% of its $12.73 billion market cap. In other words, its market cap is 3.06 times its TVL (i.e., $12.73b / $4.16b).
By comparison, Ethereum has a TVL of $125.58 billion. Given that its market capitalization is $405.99 billion as of March 29, that puts its P/TVL metric at 3.23x.
So we can see that Polygon’s valuation is reasonable and indeed, slightly too cheap using this metric (i.e., 3.1x vs. 3.23x). Moreover, if Polygon’s TVL continues to rise, as well as that of its dependent dApps like Aave and Curve Finance, the price of MATIC tokens could rise substantially from here.
For example, other dApps that use Polygon are growing quickly due to its fast transaction speed and throughput. In fact, some apps like OpenSea, the largest NFT (non-fungible tokens) exchange, allow you to choose either Polygon or Ethereum as the main network. You can then use it when you trade NFTs.
What To Do With Polygon From Here
Investors should consider that Polygon is a volatile crypto asset, although it is growing in popularity. Although its Price/TVL metric is roughly at par with Ethereum, the growing popularity of its dApps will push investors towards the crypto.
As a result, when a bullish market returns to the cryptocurrency space, you can probably expect to see Polygon as one of the winners. Taking a toehold stake now will help investors to establish a reasonably valued cost basis for their investment.
On the date of publication, Mark Hake did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.