- Polygon’s price has dropped 47% due to a slowdown in its ecosystem, with active addresses and transaction fees both declining.
- The network’s struggles in DeFi, NFTs, and overall performance point to a bearish outlook for the token.
Polygon (POL) has taken a significant hit, dropping 47% from its December 2024 highs. The price fell to $0.3910 on Tuesday, triggering concern across the crypto community. But what’s behind this massive crash? Let’s break it down.
Polygon Faces Declining User Activity Amidst Layer-2 Competition
Polygon’s network is facing a slowdown. Recent data from Nansen shows a 12% drop in active addresses over the last 30 days, falling to 5.96 million. To put this into perspective, Base, the largest layer-2 network, recorded a staggering 21.7 million active addresses in the same period. This stark contrast highlights the struggles Polygon is enduring in maintaining its user base.
Declining Transaction Fees and Volume
While Polygon’s transactions increased by 7%, reaching 91.5 million, its fee revenue tells a different story. The network saw a sharp 38% drop in fee income, now standing at $835,000. This decline becomes even more concerning when compared to Base, which processed over 218 million transactions and generated $15.5 million in fees.
The DeFi Struggles
Polygon’s decentralized finance (DeFi) ecosystem is underperforming. The total value locked (TVL) in its DeFi protocols has plummeted to just $842 million, a far cry from Base’s $3.41 billion and Arbitrum’s $3 billion. This shows that investors are shifting away from Polygon, looking for more promising opportunities elsewhere.
Falling Behind in the NFT Market
Polygon was once a dominant player in the NFT space. However, its sales have dropped by a staggering 71% in the past 30 days, now at $24.8 million. Meanwhile, Base has experienced a 388% surge in NFT sales, reaching $22.7 million. This decline signals that Polygon is losing its competitive edge, especially in the booming NFT market.
Removal from Lido DAO
Polygon’s struggles led to its removal from Lido DAO’s liquid staking program in December 2024. This move reflected the broader concerns surrounding Polygon’s network performance and growth potential.
Polygon Faces Further Decline Amid Descending Triangle Formation
Looking at the charts, Polygon’s price action paints a bleak picture. The POL token peaked at $0.7671 after its conversion from MATIC, but it has since formed a descending triangle pattern, with support at $0.4138. This bearish formation indicates further downside potential. The price has already dropped below its 50-period moving average, signaling a continuation of the downward trend. The next major support level to watch is $0.3425, the token’s lowest swing in mid-November.
Polygon’s price crash is no surprise given the ongoing struggles within its ecosystem. The network’s decline in active users, transaction fees, and overall market performance paints a grim outlook for its future. Investors should be cautious, as the road ahead appears filled with resistance. The next few weeks will be crucial in determining whether Polygon can turn things around or continue its downward spiral.
