Polygon (POL, previously known as MATIC) currently faces a pivotal challenge as AaveDAO prepares to vote on a significant proposal that could see them exit the blockchain. This decision hinges on pressing security concerns, and in light of this, artificial intelligence (AI) has attempted to forecast the potential impact on Polygon’s price.
Recently, Finbold reported on the ongoing tension between Polygon and Aave. The price of POL has been under pressure following Aave’s discussion regarding a $1 billion bridge proposal. As of that point, Polygon was trading at $0.594, reflecting an alarming 38.65% decline year-to-date.
Why Aave DAO Is Considering Leaving Polygon
In recent developments, Allez Labs, alongside Morpho and Yearn, proposed transferring approximately $1.3 billion of the Polygon-Ethereum bridge to their protocols. This move aims to enhance liquidity supply and optimize yield generation. However, this proposal has raised eyebrows among decentralized finance (DeFi) users and analysts, leading to significant concern from leaders within Aave, a premier DeFi protocol.
Notably, Marc Zeller and EzR3aL—two pivotal members of Aave’s governance—have indicated they will support the vote to pivot away from Polygon’s blockchain, driven by security worries. This vote is anticipated to occur in January 2025.
The implications of Aave’s departure could be severe for Polygon, as Aave constitutes roughly 40% of Polygon’s DeFi presence, according to a report from DL News on December 26. Interestingly, Polygon contributes to merely 1.5% of Aave’s revenue, which Zeller cited to substantiate his viewpoint. “Polygon is 1.5% of Aave DAO revenue,” Zeller stated. “In what world do we risk a billion of bad debt for this?”
AI Predictions for Polygon Price Amid Aave Tensions
As things stand, POL is trading at $0.485, marking a nearly 50% drop since the beginning of the year and an 18% decline since the recent Polygon-Aave discussions began on December 17.
Grok AI has assessed the potential fallout from Aave’s departure and believes the immediate reaction will lean towards bearish for POL’s price, predicting a potential crash. The AI’s model suggests that this could trigger a sell-off, causing Polygon to plummet 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, another 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 indicated.
Despite this pessimistic forecast, Grok also anticipates a potential recovery after testing support levels. However, it remains doubtful that Polygon will surpass $0.50 in 2025.
The Bullish Perspective
Conversely, Grok AI does consider an optimistic scenario for Polygon in 2025. For this favorable outcome to materialize, Polygon’s leadership must adeptly handle the current crisis and work diligently to restore investor confidence, alongside fostering 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, assuming market conditions remain favorable for altcoins,” Grok AI suggested.
Investors would be wise to remain vigilant regarding security risks associated with bridged assets and closely monitor the upcoming developments surrounding AaveDAO’s decision. Polygon Labs CEO, Marc Boiron, has expressed his concerns, stating, “A world in which Aave leaves is not one that I want.”
The unfolding scenario is crucial as Polygon navigates this turbulent phase while trying to maintain its position in the DeFi landscape.
