Polygon’s native token (MATIC) experienced a 16.4% rally that coincided with the launch of Polygon 2.0 Goreli testnet on Oct. 4. However, the resistance at $0.60 proved stronger than anticipated, and was followed with a 10.6% decline over the six days leading into Oct. 10.
This decline was exacerbated by negative news regarding the departure of a key co-founder and weak activity in Polygon’s zero-knowledge (ZK) rollup subnet.
MATIC’s price has wiped out previous gains from the early October rally, erasing the bullish momentum driven by the expectations of the protocol’s upgrades.
Rallies tend to follow mainnet and protocol updates
Polygon 2.0 is a network of ZK-based layer-2 chains, unified via a novel cross-chain coordination protocol. Polygon’s 2.0 scaling technology was unveiled in June 2023 as a plan for a scaling ecosystem consisting of four layers: staking, execution, interoperability, and proving. Each of these layers contributes to creating an interconnected ecosystem of chains that facilitate secure, fast, and extremely cost-effective transfers.
Among the benefits of Polygon 2.0 are enhanced security and privacy through ZK proofs, full compatibility with the Ethereum Virtual Machine (EVM), and instant cross-chain interactions without requiring additional security or trust assumptions. It’s worth noting that the project is continuing to develop its ZK-STARK-based layer-2 solution, Miden.
One could argue that the recent 10.6% retracement merely reflects an adjustment to the overexcitement triggered by the testnet launch. However, other factors may have contributed to investors’ worsening sentiment towards Polygon. For instance, Polygon’s ZK subnet, zkEVM, has lagged behind competitors in terms of activity and deposits.
Network data shows Polygon losing steam as new competition emerges
Metrics from Artemis, an on-chain data provider, reveal a significant disparity between Polygon zkEVM’s 6,210 active addresses compared to StarkNet’s 154,390 and zkSync ERA’s 239,810. A similar discrepancy exists when analyzing the number of daily transactions, with Polygon’s zero-knowledge rollup also trailing competitors.
Taking a broader perspective on the total number of transactions and deposits in the Polygon network yields suboptimal results. For example, Polygon’s total value locked (TVL) stands at $756 million according to…