Since the market peaked and started to plunge in 2022, altcoins and especially Layer 1 coins like Solana, Near, Ethereum, … have continuosly finding new bottoms. Not only is the token price falling, but money is no longer flowing into these ecosystems. Meanwhile, the two largest Layer 2 currently, Arbitrum and Optimism, are still growing continuously. What's going on?
Layer 1 is abandoned
In uptrend, Layer 1 is always the most noticed coins. Simply because when money flows to an ecosystem, the first beneficiary token is always the token of the chain itself. In addition to the veterans like Ethereum, BNB, the uptrend 2021 has brought a series of emerging Layer 1 such as Solana, Near, Fantom, .... with opportunities to xx properties. For example, $SOL has increased x260 times.
Therefore, it is normal that when the general market decrease, this group of coins becomes unattractive. Token valuation too high from being pumped hundreds of times, capitalization is up to tens of billions of dollars. While in a downtrend, money flows out and there are only few sharks left in the market, these people's assets are also often concentrated in Ethereum. In common, Layer 1 all had a sharp decrease in TVL in the past period. Some examples like TVL Solana divided 10x from ATH, Celo divided 8x, Fantom divided 18x …
The Age of Layer 2
Meanwhile, the largest Layer 2 on Ethereum, Arbitrum and Optimism are still growing strongly. It can be seen that the transaction volume on both systems has continuously increased and reached ATH this October. Although this is the period of the market is downtrend.
The reason is that as mentioned above, through the uptrend season, the money flow will eventually return to Ethereum. Layer 2 is both an extension of Ethereum and has cheap fees, so it will be very attractive. But more importantly, neither Arbitrum nor Optimism have rallied in the previous wave, and have compelling stories of their own.
Optimism has started to grow strongly during an OP Summer season. The story from the ecosystem launching OP token and airdrop for users. Huge airdrop of up to 27,500 OP/wallet (~$60,000 at that time) for those who meet the maximum requirement. The recipient of the lowest level also gets air 4,000 - 10,000 USD. Not only that, Optimism also runs the OP bonus program to boost projects in the ecosystem. This boosted the cash inflow, causing TVL to go up x3 and keep it high until now.
Projects of the Optimism system such as Velodrome, Lyra, Synthetic also grow in price x5 x10 ... or $OP itself x5. While this wave has not lost its heat, Optimism has continued to launch a series of programs to attract cash flow. From matching Curve, free NFT mints to the most recent highlight, Optimism Quest.
The event forces users to experience the projects of all Optimism, but with the great potential of the Airdrop still in the future, the expected cash flow is still pouring in. The effectiveness can be seen when the number of new users of Optimism continuously exceeds the peak. While the current OP capitalization is around 180M, a modest number compared to Layer 1s.
Arbitrum is currently the largest Layer 2 on Ethereum in terms of TVL, twice as much as the top 2 is Optimism. The special thing is, this ecosystem has not launched a token yet. Therefore, the fact that Arbitrum will launch the token this year or next year is much awaited by the community. With the amount of TVL only ½ Arbitrum that Optimism has had such a large airdrop, what potential will $ARBI still have?
Since the launch of the Arbitrum Odyssey campaign, the project has attracted so much money that it made gas spiked to the level of Ethereum. After that, Arbitrum came back with the Arbitrum Nitro upgrade, with many times the processing capacity and the cheapest price of the Layer 2 group. Thanks to this the project was able to restart the campaign to attract cash flow. Unlike Layer 1 projects, Arbitrum's TVL still maintains a stable level in the downtrend even though the token has not yet been launched.
The number of new users pouring into this ecosystem has also continuously grown and reached ATH recently.
In addition, Arbitrum also has a lot of good news supporting the long-term potential of the project, such as combining with reddit and FTX to deploy Arbitrum Nova. Recently, the Arbitrum founder team also successfully acquired Prysmatic Labs, one of the leading teams behind the Ethereum network.
It is easy to see that the current cash flow and market do not favor the Layer 1 project group. Not to mention Aptos, Sui, ... but the Layer 1 of the old wave are all less attractive investment opportunities. Meanwhile, Arbitrum and Optimism continued to grow strongly. Money flows into these two ecosystems because of their own special stories, but the common point is that they are both very potential in the coming period. Pay attention to find investment opportunities. In addition, the Layer 2 team still has potential projects such as Zk Sync, StarkWare that will be evaluated by Holdstation in future articles.
The information, statements and conjecture contained in this article, including opinions expressed, are based on information sources that Holdstation believes those are reliable. The opinions expressed in this article are personal opinions expressed after careful consideration and based on the best information we have at the writing's time. This article is not and should not be explained as an offer or solicitation to buy/sell any tokens/NFTs.
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