Polygon Has Soared 170% Off Its Low -- Here's Why It's Still a Buy | The Motley Fool (2024)

Amid all the doom and gloom about the crypto winter that you hear from the media, it's easy to overlook the fact that some cryptocurrencies have posted scorching hot returns this summer. For example, since hitting a low of $0.32 on June 18th, Polygon(MATIC -3.17%) has rallied more than 170% to $0.87. There's no need to feel like you missed the boat -- here's why it's not too late to buy Polygon and why its best days look like they are still ahead of it.

What is Polygon anyway?

Polygon was created to be a Layer-2 scaling solution for the Ethereum (CRYPTO:ETH) network. It is a proof-of-stake cryptocurrency that has grown to become the 12th-largest crypto by market cap, with a valuation of about $7.5 billion. Polygon is notable for featuring a throughput that has the potential to hit 65,000 transactions per secondand low fees. MATIC is the Polygon network's native token.

While some investors may be concerned that Ethereum's upcoming Merge event may be a negative for Polygon, it is likely that scaling solutions like Polygon will still play an important role in the Ethereum ecosystem. Polygon itself does not believe that The Merge will decrease the need for scaling solutions, and it writes that "While the merge does pave the way for sharding, this future upgrade will not be enough to scale Ethereum. In fact, Polygon will benefit from it, and it will boost the performance of our scaling solution."The Polygon team also believes that Ethereum's transition to proof of stake will help it to lower its own climate footprint by over 99%.

Belle of the ball

What do Meta Platforms (META -0.19%), Disney (DIS 1.40%), Coca-Cola (KO 0.94%), and Reddit all have in common? Probably not much, but all four of these huge companies have announced the rollout of partnerships with Polygon this summer as they seek to broaden their presence in cryptocurrency. Disney selected Polygon for its 2022 Accelerator program, a business development program in which Disney will partner with six companies to develop new offerings within non-fungible tokens (NFTs), augmented reality (AR), and virtual reality (VR). Could we see Disney Princess-themed NFTs on the Polygon blockchain in the future? That remains to be seen, but it's an encouraging sign that a company of Disney's size and stature chose to seek Polygon's expertise as it explores the medium.

Polygon was also chosen by Reddit for its new Collectibles Avatars NFT marketplace. Users who own one of the NFTs can use it as their profile picture on the site, where it will feature a special "glow-like effect." Owners of the NFTs also have the right to use the artwork both on and off Reddit. These Reddit NFTs have now made their way to NFT marketplace Opensea, where Reddit collections like The Senses and Foustlings are beginning to gain some traction and generating secondary sales of hundreds of dollars (and in a few cases topping $1,000).Reddit says that it chose Polygon as the blockchain to launch the NFTs because of its climate-friendliness and its low fees.

In May, Meta Platforms (formerly Facebook) said that Instagram users would be able to post and share NFTs from the Polygon blockchain. In August, Meta expanded the rollout of NFTs to Facebook. Meta Platforms has over 3.5 billion users worldwide, potentially giving Polygon and NFTs, in general, more exposure than ever before. In addition to Polygon, Meta also enables NFTs from Ethereum as well as the Flow(FLOW -2.88%) blockchain, so Polygon is in fairly exclusive company here for the time being.

While Coca-Cola may not seem to have much in common with these media companies that are in the business of keeping an eye on the future, in August, the 130-year-old company announced it was working with Polygon. Coca-Cola celebrated International Friendship Day by airdropping a Polygon NFT to existing owners of Coca-Cola collectible NFTs, and recipients have the ability to share an additional NFT with a friend.

The world's largest beverage company and a handful of the world's top media companies choosing to collaborate with Polygon is a vote of confidence in Polygon and its team's capabilities and long-term potential.

Bring on the deflation

Another key reason to be bullish on Polygon is that, unlike some other popular cryptocurrencies, there is a capped supply of 10 billion MATIC tokens, with about 8.7 billion of these currently in circulation. The Polygon team says that 0.27% of MATIC tokens will be burned annually. While this isn't a huge number, it makes Polygon deflationary in nature over time, which makes it stand out from cryptos with an unlimited supply, such as Dogecoin (DOGE -0.28%). If demand continues to rise and outstrips supply, the laws of supply and demand could propel the price of MATIC higher.

Winter thaw

We are still clearly in the midst of a crypto winter. Most cryptocurrencies, including Polygon, are still down significantly from their all-time highs. But the strong performance of cryptos like Polygon over the last few months shows that the crypto winter may be thawing. With its impressive performance metrics, deflationary nature, and growing list of prominent partnerships, Polygon looks like a solid bet to return to or surpass its previous highs as the crypto market rebounds.