Here is my 2022 Crypto MVP

The past year has been a painful one for cryptocurrency investors. The asset class hit an all-time high in November 2021, reaching nearly $3 trillion, but has since lost about 70% of its value. Some sort of correction was likely inevitable after the cryptocurrency’s monumental run went on in 2020 and 2021, but this correction was exacerbated by a series of controversial events that caused many investors in the sector to lose confidence.

Yet despite numerous bankruptcies, mass layoffs, and some cryptocurrencies going completely worthless, not all of 2022 has been bad. To the surprise of some, one cryptocurrency has had a phenomenal year of results.

While its price has not necessarily reflected its level of success, likely the result of ongoing macroeconomic factors, Polygon (MATIC 0.35%) earned the spot as my crypto MVP of 2022. It has remained resilient against other cryptocurrencies despite its price dropping nearly 70% year-to-date. While that price might sound like bad news to investors, Polygon’s market cap leapt into the top 10 market caps of all cryptocurrencies during the crypto winter.

But for Polygon to remain resilient, investors must have had a reason to be optimistic that its blockchain was becoming more valuable, and the list of reasons is long.

Top companies leverage Polygon for new business models

Anecdotally, the number of partnerships Polygon has entered into with companies this year may be the most of any cryptocurrency – the list of companies is long. Everyone has used Polygon a little differently, but it demonstrates the versatility of blockchain in meeting various needs for companies pursuing unique ways to use blockchain technology for new applications.

I won’t be able to go into the details of each partnership, but Polygon’s list of companies that have started using it for things like non-fungible tokens (NFTs) and decentralized financial transactions includes household names like Nike, Disney, Half, Coca Cola, JP Morganand Starbucks.

Of greater importance, however, is why these companies have chosen Polygon as the blockchain of choice to kickstart their blockchain efforts. Polygon does one specific thing very well: it creates Ethereum (ET 0.05%) faster and cheaper to use.

A symbiotic partnership

Over the past couple of years, Ethereum has risen to prominence as one of the most popular blockchains. Its smart contracts are used to program decentralized applications, NFTs, lending protocols and much more. Due to its range of use, Ethereum sometimes gets bogged down in traffic. As traffic increases on its blockchain, speeds can slow down and costs to settle transactions can rise. But with Polygon, all of that becomes a thing of the past.

Ethereum is popular not only for its smart contracts and wide-ranging use cases, but also for its security and decentralization. Companies like the ones mentioned want to use Ethereum, but it can be a bit expensive. They can mitigate this by using Polygon, which processes transactions in bundles rather than one by one and later adds them to the Ethereum blockchain at a much cheaper price.

These companies that use Polygon the most are using it for one main reason: its compatibility with Ethereum. So Polygon has become the most viable option for companies that want a cheaper blockchain but still seek the benefits of Ethereum’s popularity, decentralization, and security.

Probably just the beginning

There’s a lot of optimism for Polygon to continue its run into 2023 and beyond. Unlike other blockchains, which have experienced mass layoffs, Polygon began a round of hiring this year, a sign that the company remains diligent in its development. Additionally, there are plans to make blockchain even faster and cheaper to use. The technology known as zkEVM will group transactions more streamlined and likely attract more businesses to use the blockchain.

Considering its low price, long list of achievements in 2022, and future potential, I believe all cryptocurrency investors looking to capitalize on the wave of companies deciding to move operations to the blockchain should prioritize Polygon. Of course, that’s not to say it will return to its all-time high next month or even by the end of 2023. But in the long run, as Polygon serves more use cases, its value should increase as more companies look to enter in the blockchain race.

Randi Zuckerberg, a former director of market development and spokesperson for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, serves on the board of directors of The Motley Fool. JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. RJ Fulton has positions in Ethereum and Polygon. The Motley Fool has positions and recommends Ethereum, JPMorgan Chase, Meta Platforms, Nike, Polygon, Starbucks and Walt Disney. The Motley Fool recommends the following options: long January 2024 $145 calls on Walt Disney, long January 2024 $47.50 calls on Coca-Cola, long January 2025 $47.50 calls on Nike, short January 2023 $92.50 put on Starbucks and short January 2024 $155 calls on Walt Disney. The Motley Fool has a disclosure policy.

Tags:,

Add a Comment

Your email address will not be published. Required fields are marked *