Over the past 30 days, even the biggest names in the crypto industry have had difficulty establishing positive momentum. But don't confuse volatility and uncertainty with inaction. Peer below the surface, and it's possible to spot a few cryptos making serious moves in anticipation of the next bull market rally.
Two that stand out are Cardano (CRYPTO: ADA) and Polygon (CRYPTO: MATIC). Both are making core structural changes out of necessity, given the specter of possible enforcement actions by the Securities and Exchange Commission (SEC). But it's precisely those changes that could be setting them up for long-term growth.
Polygon
Polygon is best known as a top Layer 2 scaling solution for Ethereum (CRYPTO: ETH). In 2022, it benefited greatly from all the attention that Ethereum was getting as a result of The Merge, and lined up a number of key brand partnerships, including Starbucks and Nike.
However, Polygon is now reeling due to regulatory uncertainty. At the beginning of June, the SEC named Polygon as one of the "unregistered securities" that cryptocurrency exchanges Coinbase and Binance were offering to their customers. And the market backlash has been dramatic. Over the past 30 days, Polygon is down by 30%.
Image source: Getty Images.
But Polygon is not going down without a fight. Almost as soon as the SEC news broke, Polygon announced the rollout of what it is calling "Polygon 2.0." The goal is to reimagine and rethink every aspect of Polygon, from the underlying blockchain architecture to the utility of its crypto token. And it will be doing so over a 4-week period starting in late June. Each week, Polygon will release new updates about changes taking place.
This could have two major positive impacts. First of all, it should help to address the SEC's assertions that Polygon is a security and not a commodity. And second, it should help Polygon to fend off the growing number of rivals in the Layer 2 blockchain space. Polygon wants to use these changes to its blockchain architecture to help it become "the value layer of the internet" -- the place where people go to "create, exchange, and program value." That's a mouthful, and it will be interesting to see how Polygon tells this evolving story over the summer. Is this just marketing hype? Or is it real value creation?
Cardano
Like Polygon, Cardano has been hard-hit by the SEC's allegation that it's an unregistered security. It, too, is down 30% in 30 days. Despite the success that Cardano had in the first half of the year in growing its blockchain ecosystem, it could be all come to an abrupt halt if securities laws were to apply to every single transaction involving the cryptocurrency.
However, Cardano is fighting back. First of all, it is making clear that it is an open-source public blockchain that is highly decentralized -- not a security. Cardano is emphasizing new decentralization milestones and talking up the launch of the next stage in its blockchain development, known as "Voltaire." That lofty name comes with lofty ambitions: Cardano wants to hand back more power to community members and improve overall blockchain performance by decentralizing as much as possible.
In addition, the lead company behind the development of the Cardano blockchain, Input Output Global (IOG), announced changes to its governing structure. Overall, it is moving to what it calls a "venture studio" model. What this means in practical terms is that different business groups will be separated from one another, and then spun off later. So, for example, the group developing Cardano blockchain wallet solutions will be separate from the group developing Cardano digital ID management solutions.
Are the changes big enough to matter?
While the changes coming from Cardano and Polygon could be significant, I don't think they are getting the attention they deserve. Maybe I'm being cynical, but I think this is because these changes aren't "sexy." They don't involve splashy new product releases, and they require a wonky understanding of blockchain technology, as well as some understanding of the SEC's legal arguments.
So here's the big picture: Cardano and Polygon want to be seen as commodities, not as securities, in order to avoid SEC oversight. And they are willing to do whatever it takes to make that happen. Yes, there is a lot of regulatory risk, but both are playing the long game here. As long as you take a long-term investing approach to these cryptos, there could be a big payoff later.
