Polygon Token Migration Fails to Salvage Its Price

Recently, Polygon significantly changed its ecosystem by migrating its native token MATIC to POL. The change triggered a spike in its on-chain activity, circulating several dormant accounts.

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Recently, Polygon significantly changed its ecosystem by migrating its native token MATIC to POL. The change triggered a spike in activity on the network, bringing back many dormant accounts to life.

However, analysis of the activity growth indicates that it is largely due to massive sell-offs, especially from large holders. This sell-off pressure is evident in the price action of MATIC, which struggles to grow despite the token migration.

On Wednesday, September 4, Polygon upgraded its native token from MATIC to POL. According to the layer-2 protocol, the transition aims to ensure flexibility in the network, especially with new supplies issuance.

It’s official. The MATIC to POL upgrade is now live, after a year of community-led discussions and consensus ?

What happens now? Starting today, every transaction on Polygon PoS uses the hyperproductive token as the native gas and staking token.https://t.co/j6vlMTh9ZX pic.twitter.com/hx9l7GS4zv

— Polygon | Aggregated (@0xPolygon) September 4, 2024

The network completed the migration on a 1:1 basis between MATIC and POL. The upgrade now has POL as Polygon’s staking and gas token.

The migration, however, has transferred all of MATIC’s pending struggles to POL. Before now, MATIC faced challenges waiving off the bearish pressure from increased sell-offs from token holders.

Following Polygon’s announcement to upgrade MATIC to POL, the network recorded a spike in activity. Many dormant MATIC addresses came back on-chain to move their holdings, increasing interaction on the network.

This situation accounted for the second-largest address interaction in the year, attracting the attention of many within the industry.

According to data from Polygonscan, MATIC address activity dropped significantly by over 50% between August and July. The network activity dropped to 700,000 in August from 1.6 million in July.

Similarly, the number of daily transactions grew in late August. As of September 4, POL recorded a whopping 925% increase in trade volume. However, its price dropped to a daily low of $0.368, hitting a month-low.

Notably, the spike in trade volume amid the price decline indicates a surge in market activity due to intense selling pressure. Moreover, it reflected a panic phase where uncertainty and fear pushed Polygon holders to dump their MATIC tokens.

It’s clear that a network upgrade and the prevailing volatility in the broader crypto market impacted investors’ decisions, leading to massive sell-offs.

Polygon’s Increased On-Chain Activity Could Spark a Price Reversal

Meanwhile, some experts think the increased network activity could signal the start of a trend reversal for the token. Blockchain analytics firm Santiment noted that the recent on-chain spike on Polygon could signify an upcoming rally for MATIC.

? Polygon has been among the many networks declining since crypto's retrace began back in March. However, a notable spike in on-chain activity may be a sign that a MATIC reversal may be brewing soon. Active addresses and dormant coin spikes are common signals preceding this. pic.twitter.com/RY5NXe10ZW

— Santiment (@santimentfeed) August 28, 2024

The company mentioned: “However, a notable spike in on-chain activity may be a sign that a MATIC reversal may be brewing soon. Active addresses and dormant coin spikes are common signals preceding this.”

MATIC trades at $0.3646, showing a 2.88% decrease over the past day. Currently, the asset boasts a market cap of $171 billion and occupies the 43rd position in CoinMarketCap ranking of cryptocurrencies.

Based on technical analysis, Polygon’s moving averages indicate a “Strongly Sell” position. So, more selloffs will further stifle the price of MATIC to the south.