My Best Crypto Idea for 2022: Polygon

[ad_1]

Previewing what might be in store for Polygon (CRYPTO:MATIC) in 2022, Fool.com contributor Chris MacDonald and Eric Bleeker of The Motley Fool discuss the outlook for this top cryptocurrency. This discussion took place on January 5 during “The Crypto Show” on Backstage Pass.

Eric Bleeker: We have Polygon and it’s trading at $2.39, a market cap of $17.1 billion. I don’t know by chance, but I guess it probably makes it into the teens in terms of the biggest cryptocurrency today.

Chris, why is this a great idea for 2022?

Chris MacDonald: Yes, I think Polygon is currently 14th by market capitalization.

We’ve talked a lot about the NFT space. I thought this one would be a good conversation starter for our segment today.

But as a layer 2 network, what Polygon is, is basically a side chain for Ethereum. There are many different scaling solutions for Ethereum (CRYPTO:ETH). Investors may or may not necessarily know the nuts and bolts of what’s going on with Ethereum right now. But anyone who has transacted on Ethereum will know that the network being so popular is actually quite slow compared to many other blockchains out there, Solanas (CRYPTO:SOL) and what have you.

What Polygon does is a side chain. It basically works alongside Ethereum and can process Ethereum-based transactions, but it allows for scalability. It can perform these transactions faster because they are processed on a different blockchain. This speed and cost advantage is quite significant, especially for NFTs.

When you think of the retail segment of the NFT market as such a large segment in terms of transaction volume, the actual dollar amounts of many of these transactions are relatively small. On a layer 2 network like Polygon, an investor can go buy an NFT for a fraction of a penny, that would be the fee. Whereas on Ethereum you could pay hundreds of dollars at peak times to make this transfer and it might not be worth it.

Polygon is picking up speed and I’ve bumped up a metric on the Polygon network – NFT volumes on OpenSea in particular have absolutely increased. In June there were around 750,000, and in December that number reached 7.6 million. For Polygon, at least on OpenSea, they have increased their NFT volume by 10 times in the space of six months. It’s quite incredible.

The growth and bullish thesis with this platform is that Ethereum-based transactions are currently not as feasible as investors would like and Polygon is helping to speed up and reduce the cost of these transactions. For NFT, Metaverse games, DeFi apps, there’s a lot to like about Polygon.

Then, in the case of bears, many investors may be aware that Ethereum is undergoing an Ethereum 2.0 update which is expected to be completed at some point this year. Some experts think mid-2022 but I guess we’ll see. The threat with this is the growth of Polygon because it is a proof-of-stake platform that functions as a sidechain and takes advantage of Ethereum’s cost and relatively slower speeds. If the Ethereum update goes well and Ethereum costs decrease and speed increases, the need for something like Polygon might be reduced. This could, in theory, hurt the investment thesis with Polygon right now.

But looking at the growth over the last six months for Polygon and those metrics, it’s gained quite a significant market share. There’s a reason it’s the 14th largest cryptocurrency. It’s the one I have my eye on for 2022 and it will be interesting to see where it ends the year.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end consulting service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.

[ad_2]