Ethereum Layer-2 Networks Reach All-Time High as Attention Shifts to Bitcoin ETF
While the focus has been on the possibility of a spot Bitcoin ETF, the collateral locked on Ethereum layer-2 networks has been steadily increasing. The total value locked (TVL) across all layer-2 platforms hit a record $21.16 billion on January 3, surpassing the TVL in decentralized finance (DeFi) protocols in January 2021.
Ethereum Layer-2 Surging
Over the past month, layer-2 TVL has surged by 34% to reach $20.8 billion, just below its peak. In the past year, L2 TVL has increased by an impressive 333%. In comparison, DeFi markets have only gained 38% in terms of TVL over the same period.
Arbitrum One leads the market with $10 billion in TVL and a market share of nearly 50%. Optimism (OP Mainnet) follows with $5.8 billion TVL and a market share of 28.7%. Other layer-2 platforms like Metis Andromeda and Base have smaller TVLs.
Rotating Back to Ethereum
An analyst called this a rotation from alternative layer-1 blockchains back into Ethereum and layer-2 networks. Ethereum competitors Solana and Avalanche have seen recent surges but are now cooling down. Daily active addresses, layer-2 fees, and layer-2 stablecoin market capitalization have also been increasing.
However, ETH prices have been lagging behind due to attention being elsewhere. Once ETH price goes up, it is expected that users will move back to Ethereum and layer-2 networks.
ETH Price Outlook
Currently, Ethereum prices are stagnant at $2,245. The asset has faced resistance at $2,430 twice in the past two weeks and has failed to break it. ETH is down 8% from that high.
Although Ethereum remains 54% below its November 2021 all-time high of $4,878, the long-term outlook for the asset in 2024 is bullish.
Hot Take: Ethereum Layer-2 Networks Gain Momentum as Attention Shifts Away from Bitcoin ETF
The increase in collateral locked on Ethereum layer-2 networks has gone unnoticed amidst the hype surrounding a potential spot Bitcoin ETF. Layer-2 TVL has reached an all-time high, surpassing the TVL of DeFi protocols. This surge is attributed to a rotation back to Ethereum and layer-2 networks from alternative layer-1 blockchains like Solana and Avalanche.
While ETH prices have been stagnant, attention is expected to shift back to Ethereum and layer-2 networks once the price starts to rise. With increasing daily active addresses, layer-2 fees, and layer-2 stablecoin market capitalization, Ethereum’s layer-2 ecosystem is gaining momentum. Despite recent price resistance, the long-term outlook for ETH remains bullish in 2024.
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