Polygon (MATIC), the favorite altcoin of the 2021 bull market, has fallen out of favor over the last 12 months and has significantly underperformed altcoins such as Bitcoin, Ethereum and rival layer-2 tokens Arbitrum (ARB), Optimisim (OPT), IMX.
While Polygon has fallen out of favor with investors at this point, Arca's Katie Talati said that investors' lack of interest in the token is due to several reasons.
Speaking to Coindesk at this point, Talati stated that the reason for Polygon's poor performance may be the Ethereum Dencun update.
Pointing out that the ETH Dencun upgrade will significantly reduce transaction fees for layer 2 projects, Talati stated that Polygon will not be able to benefit much from this upgrade and its effects compared to rival altcoins:
“The upcoming Ethereum Dencun upgrade will reduce the costs for Layer 2s to send data back to the Ethereum mainnet.
“Although Polygon will benefit from the upgrade, other tier L2s such as Arbitrum and Optimism will see more significant cost reductions, which has led to the recovery of these L2s.”
Taliti also stated that another reason why there is no significant uptrend in MATIC is former Polygon President Ryan Wyatt's decision to switch to Optimisim.
“The second reason for the underperformance is the departure of Polygon's former president, Ryan Wyatt, to join Optimisim last year. Many believe that Wyatt was responsible for Polygon's major partnerships and that his departure is a serious blow to Polygon's growth efforts,” Taliti said. “He believes that he downloaded it,” he said.
*This is not investment advice.