Why Polygon, NEAR Protocol, and Optimism Plunged This Week

Cryptocurrency markets have been liquid over the past week, with most major cryptocurrencies losing height over the past seven days. Interestingly, the three companies leading the weekly decline are: polygon (Matic -4.15%), NEAR Protocol (near -3.57%) and optimism (OP -2.08%)They are down 15.7%, 19% and 22.25% respectively since Friday’s close.

As expected, the long-awaited spot approval was granted last week. Bitcoin ETFs initially saw gains across the sector as investors reduced their exposure to the sector, followed by a sell-off on the news. The selling we have seen over the past week has become more pronounced around major altcoins, and some of this selling pressure among smaller cryptocurrencies appears to reflect a broader portfolio reallocation by many investors towards megacap tokens like Bitcoin. .

That said, these three tokens have their own unique catalysts that led to their underperformance last week. Let’s take a look at what investors are currently seeing when it comes to the top 30 cryptocurrencies.

Token-specific challenges investors focus on

Aside from the understandable comeback rally from last week’s impressive surge, Polygon, NEAR Protocol, and Optimism have unique challenges that investors appear to be focusing on right now.

In the case of Polygon and NEAR, no major integration between the two networks has generated significant investor interest today. Several reports earlier today highlighting a collaboration between the NEAR Foundation and Polygon Labs to integrate Near’s data availability with Polygon’s Chain Development Kit (CDK) may have fueled enthusiasm for both projects.

This integration allows developers who want to build rollups without any knowledge to work more efficiently. Ethereum Extensions) allow you to do this in a more reliable and efficient way. However, total value locked (TVL) data coming from NEAR and Polygon suggests that these ecosystems are seeing significant weekly declines, and it is unclear whether developers will flock to these networks to reduce data availability costs instead of building directly on the Ethereum network. do. .

The upcoming hard fork of the Optimism network appears to have caused some investor anxiety over the past week. Optimism, another Ethereum scaling solution, provides rollup scaling capabilities to help users leverage faster and more cost-effective Ethereum transactions. This hard fork is expected to take place in a short period of time to make some improvements to the network and introduce new features to keep it competitive with other scaling solutions. Trading and withdrawals are expected to be halted during this fork, so investors may have a short-term incentive to stay away from the network for the time being.

Where are these altcoins headed from here?

It is unclear to what extent investors should take the recent declines in Polygon, NEAR Protocol, and Optimism at face value. There is some trading and TVL data that may suggest there is an underlying basis to this decline. However, given the short-term nature of certain catalysts, such as Optimism’s hard fork, this recent decline may be at least somewhat overblown.

So, I think cryptocurrency investors looking at scalable networks will want to pay close attention to these three tokens in the coming weeks. In my opinion, there is not enough data to justify very bearish price action for these tokens this week.

So I wouldn’t be surprised if some sort of rally materializes as long-term investors jump into projects with strong underlying growth prospects. For now, let’s put these three tokens in that category.