While the current crypto winter has knocked the wind out of the crypto sector, recent rallies from Bitcoin, Ethereum (ETH -3.03%), and other tokens are showing signs that the sector may be down, but it is certainly not out.
Most cryptos are still down sharply from their all-time highs, but many have also staged fast and furious rallies off of the 52-week lows that they hit in June. One prominent example is Polygon (MATIC -3.04%), a scaling solution for Ethereum, which has gained almost 180% after bouncing off of its low of $0.32 on June 18th. So should investors buy Polygon while it’s below $1?
What is Polygon?
Polygon is a proof of stake cryptocurrency that serves as a Layer-2 (meaning that it is built on top of the Ethereum network) scaling solution for Ethereum. After its recent run, Polygon is now the 13th largest cryptocurrency in terms of market capitalization with a value of $7 billion, surpassing the likes of Avalanche and Shiba Inu.
In terms of throughput, Polygon can potentially handle 65,000 transactions per second. Fees are minimal and typically cost users pennies rather than dollars.
I like the fact that Polygon has a capped supply of 10 billion tokens, meaning that it is not an inflationary asset, and at some point, demand could outpace the total supply, which would be good for Polygon holders.
Polygon hit an all-time high of $2.90 in December 2021, meaning that while it has staged a nice rally over the last few weeks, there is still plenty of room to run before it approaches its previous high-water mark again.
Disney and Reddit jump on board
We are still in the midst of a crypto bear market, but the team behind Polygon hasn’t been resting on its laurels or retreating to their yachts — they are hitting the pavement and forging new partnerships.
For example, Walt Disney (DIS 4.12%) recently chose Polygon for its 2022 Disney Accelerator Program. The Accelerator is “a business development program designed to accelerate the growth of innovative companies from around the world.” Polygon will work with Disney and the other companies selected to further explore NFTs (non-fungible tokens), artificial intelligence, and augmented reality.
And it’s not just Disney — in July, popular news site Reddit announced that it would be launching its new Collectibles Avatar NFT marketplace on Polygon. According to Reddit, it chose to work with Polygon because of its low transaction fees and its commitment to carbon neutrality. Previously, Twitter and Stripe tapped Polygon for a project to facilitate payments to content creators via USD Coin.
With major companies like Disney and Reddit on board and looking to use Polygon as a solution and to leverage its capabilities, this is a vote of confidence, removing some of the existential risk that hangs over some other alt coins (basically anything other than Bitcoin and Ethereum) in an environment where these tokens and teams will not have as much access to easy money as they did during the height of the crypto bull market.
Within the crypto world, many projects that were built on Terra, before its implosion in May, have now migrated en masse to the Polygon blockchain. CoinTelegraph reports that 48 projects have moved from Terra to Polygon, including OnePlanet, an NFT platform, and Derby Stars, a play-to-earn horse-racing game that had previously attracted significant attention from venture capital investors.
Should you buy Polygon while it’s under $1?
Cryptocurrencies, especially alt coins and ones further down the risk curve in terms of market cap, are still early-stage, speculative investments, a point that has unfortunately been hammered home during the spring and summer of 2022. Most investors are probably best served by buying them as a small part of a well-balanced portfolio.
But for risk-tolerant investors, a small, speculative investment can lead to some great returns over the long term. With some serious momentum behind it as it surges off of its cycle low and a blossoming array of partnerships with companies like Disney and Reddit, Polygon looks like one of the strongest alt coins out there and a sensible addition to portfolios below $1.
Michael Byrne has positions in Bitcoin and Ethereum. The Motley Fool has positions in and recommends Avalanche, Bitcoin, Ethereum, Polygon, Twitter, and Walt Disney. The Motley Fool recommends the following options: long January 2024 $145 calls on Walt Disney and short January 2024 $155 calls on Walt Disney. The Motley Fool has a disclosure policy.