- If you want a real crypto ‘pop’, look past the majors of Bitcoin and Ethereum and focus on the smaller tokens.
- In the current market, I’m only trading ‘screaming buys’ that I feel comfortable Hodling if a crash does materialise.
- Polygon network is a blockchain solution taking advantage of Ethereum’s overload; it’s seeing rapid adoption.
For me, crypto is a pure trade at the moment. After investing and trading crypto, equities seem plain dowdy, but I’m not going to be seduced by that. Crypto is going to be an exciting and hugely profitable market for years to come and you must play while understanding that the risk/reward is much more extreme than with stocks.
I have been a crypto bear for some time because, after the big jump of Bitcoin from below $10,000 to around $40,000, I expected a major crash. That, as yet, has not happened. I have tiptoed around since then only trading screaming buys and then only if I feel I can hold them long term if a crash kicks off.
One such trade is MATIC, the token of Polygon and its Layer 2 blockchain ‘Ethereum scaling solution’. The Polygon Network acts as an overflow for Ethereum, which is generally termed a Layer 1 blockchain.
The idea is a token holder bridges from Ethereum to Polygon (that is sends assets from one ecosystem to another), or back the other way and uses Polygon as the settlement and transaction chain, posting back to Ethereum when the work is done. In this way, anyone can transact for small fees rather than the gigantic ones currently plaguing Ethereum.
As such, owning Polygon's MATIC-USD is a proxy for Ethereum and a play on the maxed-out capacity of Ethereum where transaction costs are prohibitive and at the same time driving the price of Ethereum higher in a vicious cycle.
There are other blockchains trying to take advantage of Ethereum’s overload either as alternatives, you can call it Layer 1 blockchain, or as Level 2 blockchains like Matic. However, a Layer 2 blockchain is just a Layer 1 blockchain in waiting, so you can see them as all in the same boat of coat tailing Ethereum.
Of these contenders, Polygon (formerly Matic Network, but still retaining the Matic moniker for its token) is where the dev action is. Projects are jumping onto Polygon at a tremendous pace, which is a strong sign of the future success of the Polygon blockchain; progress other more highly-rated contenders do not seem to be enjoying. Polygon has a great product, and it is getting fast take up; NFT projects are one such area where there is hugely accelerated adoption.
Its market cap is $13 bn, with other Ethereum Level 1 and 2 alternatives and challengers valued at multiples, for example:
Solana is worth $68bn, Cardano $50bn, Polkadot $40bn, Avalanche $28bn.
With Polygon gaining dramatic traction it should catch up fast driven by this rapid adoption.
If you want to be long crypto you can just buy the majors, but further down the food chain is where the pop is. If Ethereum or Bitcoin doubled, the small stuff can x4, x10 and more. Of course, picking winners from losers is a tricky game in crypto.
Polygon however is a winner for sure.
I bought Polygon at 3c, before the name change, and sold it at 17c. I’m a general bear on crypto, so it takes a lot for me to jump into anything in that market right now. However, Matic/Polygon hits all my targets so I’ve taken the plunge on the belief it will ride up the charts to at least become a peer to other contender chains in terms of market cap.
It’s a bet on Ethereum and its momentum, and while I’m still generally bearish, I know if you are going to trade, you need to trade what you see, not what you think, and clearly until further notice Ethereum is bullish. Meanwhile, Polygon will coat tail it with the potential of a lot of alpha to Ethereum’s performance.
This article was written by
Analyst’s Disclosure: I/we have a beneficial long position in the shares of MATIC-USD either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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