Matter Labs, which manages Polygon, has announced that the beta version of its Zero-Knowledge Ethereum Virtual Machine (zkEVM) will be released on March 27, 2023. Mainnet before zkSync and Scroll.
Zk-based rollup technology is accepted as the gold standard for scaling. Existing optimism-based rollups such as Arbitrum and Optimism have his EVM capabilities, but are less secure because they are “fraud-proof”. Malicious transactions in optimistic rollups can remain active for up to 7 days or longer before being reversed. Therefore, it gives an advantage to zk technology.
Additionally, the Ethereum community’s focus on liquid staking derivatives is likely to shift to the Layer 2 network after the Shanghai upgrade scheduled for March. This is because Ethereum Improvement Proposal 4844, an update following Shanghai, will reduce the cost of L2 rollups by a factor of 10-100. A functioning zk-based rollup solution could attract new projects to its ecosystem.
Polygon (MATIC) has built a strong bullish narrative in the market with the upcoming zkEVM launch. The team’s efforts in the Web3 space are promising and showing signs of picking up activity. The growth of its decentralized finance (DeFi) ecosystem has stalled and may remain so for much longer.
Technically, Polygon’s market structure looks bullish. However, the recent 78% rise in the price of his MATIC since early 2023 could adjust as speculative buying cools down. A situation like this could provide an ideal entry point for swing trading on MATIC.
Polygon’s DeFi sector stagnates, but Web3 activity rises
Since early 2023, Polygon has witnessed a surge in non-fungible token (NFT) activity, especially in low-cost gaming assets. According to data from Dune Analytics, his NFT sales numbers on Polygon surpassed Ethereum for the second consecutive month in December 2022 and January 2023. Ethereum still leads in total volume, but Nansen’s NFT activity data shows minting and sales volume on Polygon is increasing. From the beginning of 2023, it will continue to increase.
Meta also chose Polygon as the base layer for creating a digital collection on the social media app Instagram. The feature is currently in a limited testing phase, but should quickly catch the attention of Instagram’s 1.28 billion users.
In November 2022, Matter Labs appointed former YouTube gaming head Ryan Watt to lead gaming venture Polygon Studios. Watt told Cointelegraph that Polygon’s Web3 strategy takes a holistic approach of “embedding Web2 companies such as Starbucks, Adobe, Clinique and Stripe to consolidate their Web3 capabilities.”
Additionally, Blockchain includes the development of over 60 Metaverse projects, including leaders in The Sandbox, Decentraland, and Somnium Space. Finally, his $450 million funding round for Polygon in February 2022 could provide the tailwind needed to continue development on the Web3 front.
Meanwhile, the growth of Ethereum sidechains in the DeFi sector has stalled. The ongoing macroeconomic pressures and regulatory crackdown on stablecoins may continue to add stress.
Total liquidity across DeFi applications on Polygon is below November 2022 levels, suggesting that users are still reluctant to interact with these protocols. In addition to security risks, declining yields across the DeFi space are also a major reason for the decline in activity.
By comparison, Arbitrum’s DeFi ecosystem is doing relatively well compared to most others thanks to expectations around token airdrops and active development.
Still, Polygon ranks fifth in total liquidity across DeFi platforms, ahead of Avalanche, Solana, Optimism, and Fantom, which is encouraging. Favorable liquidity conditions are essential for his thriving DeFi ecosystem, and Polygon will be able to benefit from the increased focus on DeFi. Additionally, the launch of zkEVM could also attract DeFi development.
Investors are bullish on MATIC
Futures market data shows that traders are bullish on MATIC, with open interest increasing to a 2022 high with a long-to-short ratio of 1.58. While the bullish outlook is encouraging, it could pull back prices and wipe out overleveraged positions.
On-chain balances on exchanges suggest that many investors did not move their coins onto exchanges as the price surged from $0.75 to $1.25. As long as the sale is unlikely, it shows the confidence of the buyer.
Related: Solana (SOL) Price Rise May Fail Due to Weak Fundamentals
However, if the Relative Strength Index (RSI) indicator starts tapping resistance around the 65 level, the price could pull back towards the $1 support level. Bullish momentum may require a consolidation around the 50 RSI level before moving up further.
The organic development of Polgyon’s NFT trading activity and building a bullish narrative around zkEVM is likely to continue pushing MATIC prices higher in 2023. ) continues its upward trend.
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