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.
US is not a key market for Polygon
While the 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 official statement 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.
We like the confidence shown by the team.
Polygon 2.0 is on the cards
Polygon Labs and its 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 blog post 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 begun developing the idea.
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.
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 the long-term accumulation of the asset.
MATIC long-term holders are holding fort
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
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 security, MATIC will likely recover in value with time. Investors can look at allocating a portion of their portfolio to the asset in the $0.3–0.5 price range for long-term value.
