As a seasoned researcher with extensive experience in the cryptocurrency market, I have closely monitored the recent performance of Layer 2 scaling solution Polygon (MATIC) amidst the broader crypto market downturn during the second quarter of 2024.
In Q2 2024, when the wider crypto market and Polygon‘s native token, MATIC, underwent a slump, the layer 2 scaling solution Polygon managed to keep up a robust network activity as per the latest report by market intelligence provider Messari.
Polygon Weathers Crypto Market Downturn
During the past three months, MATIC experienced a significant decrease of 44.3% in its market capitalization, bringing it down to $5.5 billion. This placed MATIC as the 20th largest crypto asset as of now, although it currently holds the 26th position. Despite this market cap reduction, the underlying metrics of the MATIC protocol continued to demonstrate strength on-chain.
In comparison to bigger cryptocurrencies like Bitcoin and Ethereum, which experienced a decrease in market value amounting to 12% for Bitcoin and 6% for Ethereum during the same timeframe.
During the second quarter of the year, Polygon’s network performance remained steady thanks to the execution of Ethereum Improvement Proposal (EIP) 4844 on its mainnet in Q1 2024, as reported by Messari. In simpler terms, EIP 4844 significantly contributed to Polygon’s network stability and consistent performance during this period.
The introduction of “blobs” in this network update led to a substantial reduction in average transaction fees on Polygon, decreasing from $0.017 to $0.01, equating to a 41.1% fee decrease.
The decline of $4 million, or 40.6%, in Polygon’s Q2 2024 transaction fee revenue wasn’t a result of reduced user activity. Instead, it was attributed to the implementation of EIP-4844, which lowered fees. Yet, the number of Polygon users persisted in increasing robustly, as evidenced by impressive growth across various crucial performance metrics.
On-Chain Activity And Ecosystem Growth
Based on the findings in the report, the daily average of active cryptocurrency addresses reached a new high of 1.2 million, marking a significant 47.6% rise compared to the previous quarter. Furthermore, the number of daily returning addresses saw an even more substantial increase, climbing by 50.5% to reach 1 million. Additionally, the report noted that an average of 167,800 new addresses were being added to the network every day, representing a growth rate of 31.7%.
The report points out that Polygon processed approximately 4.1 million transactions per day on average, which is slightly below its record high but marks a 3.9% rise in comparison to the preceding quarter.
On the other hand, Arbitrum (ARB) and Base recorded an average of 545,000 and 528,000 daily active addresses respectively in contrast to each other.
The decrease in Polygon’s decentralized finance (DeFi) total value locked from $1.33 billion to $1 billion was primarily driven by the fall in MATIC‘s price, rather than a significant withdrawal of capital. Contrarily, Messari data indicated that the TVL measured in MATIC tokens grew by 38.1% to reach approximately 1.8 billion tokens.
On Polygon, the Decentralized Finance (DeFi) platforms showed varied outcomes. Specifically, the TVL (Total Value Locked) for Aave, Uniswap, and SushiSwap decreased by amounts between 13% and 25%. Among these, Quickswap recorded the most significant decrease, with a drop of 35%.
To put it another way, Polygon’s NFT market continued to hold its ground, with the average daily NFT trading volume decreasing by around 5.7% to reach approximately $1.8 million. Concurrently, the number of daily NFT sales experienced a noteworthy rise of nearly 1.8%, totaling roughly 52,000 transactions, highlighting the persistent enthusiasm among collectors.
As I pen this down, MATIC has witnessed a modest 5% rise in value, reaching $0.512. It previously touched a 2-year bottom at $0.428 on the 5th of July.
In addition to its concerning price drop, the token’s trading volume has decreased by 30% over the past few days, equating to a significant loss of $197 million as per CoinGecko statistics. This downturn has resulted in a substantial gap of 82% between MATIC‘s current price and its all-time high of $2.91, which was reached during the 2021 bull market.
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2024-07-27 10:48