Polygon's Expanding Ecosystem Supports MATIC's Rise to All-Time Highs

Layer 2 (L2) solutions for the Ethereum network have become a hot topic of discussion, with speculation about its associated tokens supporting a number of protocols’ surges this year. Parabolic growth in the decentralized finance (DeFi) and non-fungible token (NFT) space has also led to a surge in the cost of making simple transfers, which has prompted developers and investors to migrate to L2-enabled platforms.

One L2 solution that saw its token price rise to new highs earlier this year and now looks poised to break out higher again is Polygon (MATIC), a proof-of-stake blockchain protocol aggregated on Ethereum Scalable solutions to support multi-chain ecosystems.

Data from Cointelegraph Markets Pro and TradingView shows that MATIC hit a low of $1.01 on Sept. 21, and over the past few months, the price has been on a steady uptrend that brought MATIC to $2 on Dec. 1 above the mark.

Polygon’s ecosystem is expanding, as can be seen in protocol releases, cross-chain migrations, the release of a Polygon-focused exchange-traded product (ETP), and a steady rise in user activity.

Expansion of the ecosystem

One of the biggest drivers of MATIC price and on-chain activity is the addition of new protocols to the Polygon network, namely project launches and cross-chain migrations.

Recently, the IDEX decentralized exchange announced that it will launch a v3 version of its exchange on the Polygon network, making it the first hybrid liquidity DEX on Polygon.

Polygon has already seen project launches on the OpenBiSea NFT marketplace as well as gaming/DeFi platforms like Rainmaker Games, Harvest Finance, and Jarvis network.

Currently, the Uniswap community is voting on whether to add Polygon support to Uniswap v3. In the first stage of voting on November 25, most people agreed, and the process has moved to the second stage.

Growing Institutional Support

Another reason for the bullish price action for Polygon is the increased interest from institutional investors. Several of Polygon's exchange-traded products (ETPs) have been listed in recent months, including the Osprey Polygon Trust in September and the 21Shares Polygon ETP in November.

Polygon is also on the list of assets being explored by Grayscale Investments as a potential trust candidate.

The network is also benefiting from a $20 million investment fund launched by Wintermute, a digital asset market maker focused on helping guide the development of decentralized applications on Polygon.

Currently, the Polygon network is getting more attention as it prepares to host the ZK Summit on Dec. 9, where developers will discuss “the status and future of zk-STARKs and applications of zero-knowledge proofs.”

A third reason for the bullish price of MATIC is the steady increase in users on the network, as evidenced by the increase in wallet addresses holding balances.

As the chart above shows, the number of Polygon wallets holding balances has grown steadily throughout 2021 and is currently at an all-time high of 282,760.

Evidence of increased activity can also be found in data on total revenue generated from fees on the network, which has been steadily increasing in the second half of 2021.

As new protocols continue to roll out on the Polygon network, those statistics could rise if new users continue to use the platform to escape high fees on the ethereum network.

Prior to the recent price rally, Cointelegraph Markets Pro’s VORTECS™ data began to detect a positive outlook for MATIC on October 15.

Cointelegraph's exclusive VORTECS™ score is an algorithmic comparison of historical and current market conditions, with data points including market sentiment, trading volume, recent price movement, and Twitter activity.

As shown in the chart above, MATIC's VORTECS™ score surged into the green zone on October 15 and reached a high of 94 around 48 hours before the price began a 57% increase over the next six weeks.