Why Polygon (POL) price is crashing
Why Polygon (POL) price is crashing 
Cryptocurrency Dec 17, 2024 Share
Polygon (POL, formerly MATIC) price is crashing by 38% year-to-date, suffering a high-time frame hit with the rebranding. Additionally, recent developments related to Polygon’s and Aave’s (AAVE) governance proposals have brought more turmoil to POL price this week.
In particular, Allez Labs, Morpho Labs, and YearnFi have come together to make a governance proposal for Polygon’s bridged stablecoins. According to the pre-PIP, these DeFi protocols want to activate the $1.3 billion in stablecoin reserves of the PoS bridge.
Pre-PIP: Polygon PoS Bridge Liquidity Program. Source: Polygon Governance
The community, however, received this proposal with bad eyes, bringing fear, uncertainty, and doubt regarding the safety of users’ assets. Comments in the Polygon Foundation’s related post talk about how this is “not a good idea,” “the worst idea ever,” or a “terrible idea from a risk-awareness perspective,” said Torgin, auditor at Chain Security.
Picks for you
Crypto trader makes $8.3 million in 20 minutes 48 mins ago The Bitcoin ‘train still has room to run' after the $107,000 record high 2 hours ago Atom Accelerator and Neutron invest $500,000 in CosmWasm 2 hours ago Aurora Labs upgrades the TURBO ecosystem with TurboChain and TurboSwap 2 hours ago
“Sorry, this is actually not a good idea because the people who hold stablecoins on the Polygon PoS bridge have decided not to take risks with it. By putting it inside a vault, we’re forcing them to take risks and not rewarding them for it.”
– Nomad (@JourneyMacro), as a comment on X
Aave proposes removing Polygon from its lending services
Besides the immediate community backlash, other decentralized finance protocols have already started to take action against Polygon’s bridge proposal. For example, the AaveDAO founder Marc “Billy” Zeller made an Aave governance proposal as a direct response four days later.
Zeller argued that “Polygon is 1.5% of Aave DAO revenue,” judging the billion-dollar-worth bad debt risk not worth it. The discussion happened in a post by Ignas, explaining it would represent a huge loss for Polygon.
“If @lemiscate [(Marc “Billy” Zeller)] proposal passes, LTV will [be] set to 0% (basically shutting operations), freeze multiple asset reserves on Aave V3 Polygon, and even migrate governance from Polygon. Such [an] L for Polygon.”
– Ignas | DeFi
Polygon (POL) price analysis
Notably, Polygon’s native token is trading at $0.594, down 38.65% year-to-date, despite crypto being in a bull market. Furthermore, since late September, POL (formerly MATIC) has seen a significant volume drop, suggesting a lack of interest from investors.
Polygon (POL, formerly MATIC) year-to-date price chart. Source: Finbold
On the other hand, AAVE has surged by nearly 120% in the last 30 days, as Finbold reported, with bullish potential for the year-end.
Now, traders and investors speculate on the consequences of Polygon’s proposal to use its bridge’s reserves for DeFi yield farming. Moreover, Aave’s response could also drastically influence the demand and utility of POL, potentially affecting its market price.
This happens in a critical moment for the project, considering analysts expect Q1 2025 to ignite “the mother of all bull markets,” risking leaving Polygon behind in the so-awaited crypto bull run.
Featured image from Shutterstock.
