Will Layer 1 tokens win the race in 2022 with MATIC in price discovery?

Overall, the fourth quarter of 2021 has been relatively positive. The growth of layer-1 protocols has been noteworthy, with coins like Solana, Terra (LUNA), and MATIC providing independently determined pricing actions. In reality, MATIC's new ATHs were feeding the narrative at the time of writing, with the larger market looking good.

On December 26, Polygon's native token, MATIC, hit a new all-time high (ATH) of $2.9 as the holiday season bullishness drove the bigger market. However, MATIC's recent price discovery was driven by increasing activity and interest in the network rather than bigger market moves.

MATIC flying high 

Driven by sustained network growth and high active addresses, MATIC’s price recently broke ATH and has been in a larger uptrend since December 15. Its high address activity has continued to show increased interest surrounding the Polygon Network with over 8,000 daily active addresses making MATIC one of the top-5 most active coins and most used coins. 

Source: Sanbase

HODLers distribution by concentration presented that over 75% of the ownership constitutes whales. For MATIC, whales from 1million to 10million were comfortably accumulating until the recent rally while smaller whales were showing some accumulation patterns too.

Further exchange balances for MATIC had dropped down to ATH levels as more coins left exchanges amid a positive sentiment. That being said a general rise in the number of larger transactions and large transaction volumes highlighted how the asset was seeing an increasing institutional interest as bigger players took over. 

Source: IntoTheBlock

In terms of fundamentals, MATIC looked good and presented a healthy rally but what does its rise tell about the market. 

MATIC rise could point to.. 

Well, the recent MATIC rally saw the altcoin independently rally as its BTC correlation saw a new all-time low. 

Source: IntoTheBlock

Previously, Solana and Terra (LUNA) showed a similar price dissociation from the market, with the two assets' connection to BTC likewise seeing lower boundaries.

Analysts have noticed an increase in capital inflow in networks like Polygon, Solana, and Terra over the previous month, indicating that MATIC's gains are symptomatic of the rise in L-1 protocols. MATIC was in price discovery mode as well, similar to Terra and Solana during their earlier rallies.

L-1s' total value locked increased dramatically as retail and institutional interest in them grew over the last year. So far, it appears that L-1s will be ready to take on 2022 if network development and on-chain activity continue.