Polygon, one of Ethereum’s prominent Layer-2 networks, has announced the much-anticipated transition of its MATIC token to POL, scheduled for September 4. Concurrently, user activity on the network plummeted to its lowest point in months. On August 18, Polygon’s Proof-of-Stake (PoS) chain experienced a significant drop in transaction numbers, recording just 2.44 million transactions, the lowest since December 2023, as per data from Polygonscan.
Why Are Transactions Dropping?
A decline in network transactions generally indicates fewer active users. For Polygon, uncertainty about the MATIC to POL transition might be prompting users to delay their transactions until the process is completed, contributing to the observed drop in activity.
What Does This Mean for MATIC?
The performance of MATIC has mirrored the network’s activity slump. The altcoin has seen a modest 3% increase in the last 24 hours, trading at $0.41, despite a 27% surge in trading volume to $142 million. The looming transition to POL has added to the market’s uncertainty, slowing down the altcoin’s growth.
Key Insights from the Transition Period
– Despite the overall decline, Polygon’s DeFi sector remains strong.
– On August 18, the network’s total locked value (TVL) and decentralized exchange (DEX) trading volumes experienced significant growth, showing continuous interest from users.
– According to Artemis data, TVL increased by 5%, reaching $859 million, and daily DEX trading volumes surged by 21% to $69 million.
Resulting Market Dynamics
Despite the lack of substantial value increase post-announcement, MATIC has seen a rise in buying activity. Its 12-hour chart reveals an upward trend in the Relative Strength Index (RSI), hinting at a shift from a slight downward trend to a more neutral or upward momentum. If this buying pressure sustains, MATIC’s price could rise to $0.55. Conversely, a shift to negative market trends could see it fall to $0.33.