Polygon (POL, formerly MATIC) is going through a significant crisis as the AaveDAO is set to vote on a proposal to leave the blockchain due to security concerns. Finbold turned to artificial intelligence (AI) to analyze this context and provide a Polygon price prediction if this comes true.
Finbold covered Polygon-Aave drama last week, as POL’s price reacted negatively to Aave’s (AAVE) response to the $1 billion-bridge proposal. At that time, Polygon was trading at $0.594, down 38.65% year-to-date.
Why is Aave DAO considering leaving the Polygon blockchain
In summary, Allez Labs, along with Morpho and Yearn, proposed transferring about $1.3 billion of the Polygon-Ethereum bridge to their protocols for liquidity supply and yield generation. Many decentralized finance (DeFi) users and analysts expressed concern to this proposal, including relevant leadership from Aave, the world’s leading DeFi protocol and competitor of the proponents.
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As a result, Marc Zeller and EzR3aL, two of the most influential figures on Aave’s governance’s decentralized autonomous organization (DAO) said they plan to support Aave protocol leaving the Polygon blockchain due to security concerns in a vote expected to happen in January 2025.
This could be a significant hit for Polygon price and ecosystem, considering Aave represents around 40% of Polygon’s presence in DeFi, according to a DL News’s report on December 26. Meanwhile, Polygon accounts for only 1.5% of Aave revenue, an argument Zeller used to justify his position.
“Polygon is 1.5% of Aave DAO revenue,” Marc Zeller commented in a related thread. “In what world do we risk a billion of bad debt for this?”
Grok AI’s POL price prediction amid Polygon-Aave drama
As of this writing, POL (formerly MATIC) is trading at $0.485, down nearly 50% year-to-date. This also represents an 18% drop from when we reported Polygon-Aave’s drama for the first time on December 17.
Grok AI: Polygon price bearish prediction
First, Grok AI believes the immediate response to Aave leaving Polygon would be bearish for POL’s price, predicting a crash. This, according to xAI’s model—paralleled to Google—could create a sell-off driving Polygon to as low as $0.30.
“The loss of such a major player could shake investor confidence, leading to a sell-off. Given POL’s already negative performance year-to-date as of late 2024, an additional drop might push the price below current levels, potentially testing lower support levels like $0.30 or even lower if market sentiment turns very bearish.”
– Grok AI output on the Polygon-Aave drama
The AI expects a bounce up after testing the price support. Nevertheless, Grok doubles down on the bearish stance, saying Polygon will hardly surpass $0.50 in 2025.
The bullish case
On the other hand, Grok also considers a potential upside, with a bullish price prediction for Polygon in 2025.
For that to happen, the AI says Polygon’s leadership must be able to deal with the ongoing crisis and loss of confidence from investors, besides delivering a solid work next year, capable of attracting significant demand for its ecosystem.
“If Polygon adapts and grows despite this setback, predictions could range from $0.63 to $1.91 by the end of 2025, as suggested by some analyses, assuming market conditions remain favorable for altcoins.”
– Grok AI
As things develop, investors must understand the security risks using bridged assets could incur to the ecosystem and closely watch what happens next regarding AaveDAO’s decision. Polygon Labs CEO, Marc Boiron, already said that “A world in which Aave leaves is not one that I want.”
Featured image from Shutterstock.
