The Matters of MATIC, and Why Traders are Racing to the POL

Polygon’s transition from $MATIC to $POL officially kicked off on September 4, 2024, marking a major upgrade in how the network operates. This shift sees $POL replacing $MATIC as the native gas and staking token throughout the Polygon ecosystem. This change is part of the larger Polygon 2.0 roadmap, which was first discussed publicly in mid-2023. Since then, the team has shared detailed steps about how the migration would unfold, including the improvements that $POL would bring to the table.

Before the main migration began, a testnet upgrade was launched in July 2024. This gave developers and users a chance to get familiar with the process and ensure a smooth transition. The migration isn't just about swapping tokens—it represents a key technical shift designed to make the network more scalable, secure, and efficient​. Nevertheless, there has still been a wide range of confusion from retail traders, trying to get a grasp as to what this transition means for their personal portfolios. Several social media personalities have done a great job in recent days of providing clarification to the masses, such as @crypto_vadim:

The switch from $MATIC to $POL has sparked a lot of trading activity, with users swapping their old $MATIC tokens for the new $POL. While the conversion rate is 1:1, traders are moving to $POL because of its broader utility. Unlike $MATIC, which was mainly used for staking and gas fees, $POL brings enhanced features like multi-chain staking, allowing users to stake across different chains in the Polygon network. This feature improves network security and offers new opportunities for earning fees, making $POL much more attractive.

One fascinating visualization we have picked up on is the contrast between $MATIC and $POL is the level of network growth (new daily addresses created) between the two. Right as September struck, it's no surprise to see $POL exploding with new wallets. And as of today $MATIC's 794 new wallets vs. $POL's 487 new wallets indicates we may inevitably see a flip within the next week or two in having more daily $POL wallets created.

And it isn't just about the level of new wallet creation. The level of $MATIC wallets being liquidated in order to swap for $POL is immense. Since August 15th, there has been a net loss of approximately 11.8K non-empty $MATIC wallets. On the other side of the coin, 1,826 more non-empty $POL wallets exist since that same time (a 64% rise).

A great way of seeing how both of these assets are transitioning through the mass exodus of retail traders from $MATIC is to look at wallet holdings by tiers. As small and medium traders dump their wallets, the amound of $MATIC's total supply held by wallets with 1M or more coins is closing in on 95%.

Meanwhile, we have seen $POL's supply held by these 1M+ wallets drop from 98% to 92% in a matter of 2 weeks. This is what happens when small and mid sized traders jump into a new asset with haste. Expect for this trend to continue, though the scramble for swapping tokens will slow down until the announcement is made that $MATIC is being discontinued on large exchanges like Binance.

Another reason for the increased retail interest in $POL is the ongoing price volatility. Both $MATIC and $POL (trading identically for the indefinite future) experienced notable price drops leading up to the migration, largely due to the market-wide retracements that have been occurring for the vast majority of altcoins. This points to the argument that $MATIC's total holders, as is the case for many altcoins right now, would be hemorrhaging wallets even without this transition to $POL.

Traders are also drawn to $POL for its long-term benefits. The token not only allows for multi-chain staking but also gives users more control in governance, enabling them to have a say in how the network evolves. With its ability to generate fees from multiple sources, beyond just gas and staking, it's not surprising to see $POL getting scooped up quickly by traders thinking about the long-term value after markets settle down their bleeding​.

We recommend keeping an eye on the pattern between bullish and bearish sentiment for both tokens (despite their 1:1 price connection). In the long term, this transition should theoretically have a positive impact on Polygon's ability to grow. An increase in "selling" or "bearish" calls on social media would be a great sign that a bottom is finally approaching. Feel free to bookmark this chart link, snapshotted below:

As the migration continues, $MATIC and $POL are both active during a transitional phase, but over time, $MATIC will be completely phased out. It is probably many months away, but just keep this on your long-term radar if you own any. This gradual shift is designed to minimize disruption, while giving traders and developers time to adjust. Looking ahead, $POL's enhanced capabilities are expected to unlock more value and solidify its role in the Polygon ecosystem. The network’s future looks bright, with its expanded architecture offering scalability and flexibility, setting it up for sustained growth in the blockchain space.

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Disclaimer: The opinions expressed in the post are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security or investment product.