Layer 2 Tokens: The Unpredictable Investment Opportunity in the Cryptocurrency Market

After a year of torpidity, “layer 2” digital money that come from tasks established on “layer 1” blockchains like Bitcoin and Ethereum have experienced a rebirth, thanks to the boosting popularity of cryptocurrency.

Anticipation of reducing united state loaning prices and a feasible U.S. spot bitcoin exchange-traded fund have lifted crypto rates since the summer, with market bitcoin gaining by regarding half because completion of August.

Symbols associated with layer 2 projects – which usually aim to speed up deals and reduce costs – have a mixed market cap of concerning $14.3 billion, concerning a tenth of the total crypto market, according to data from

Matic, the biggest layer 2 token with a market cap of $6.90 billion, has actually jumped 20% to $0.74 over the past one month, according to CoinGecko. It’s made use of on Polygon, a system that reduces congestion on the Ethereum network.

Over the past month, the 4 coins that follow, specifically immutable, mantle, arbitrum, and optimism, have actually experienced substantial boosts in value ranging from 9% to 105%. These coins are currently trading at prices varying from $0.5 to less than $2 per coin.

All 5 tokens are down in between 16% and 86% from their all-time highs struck over the past 2 years, though.

Ether, the layer 1 token linked to the Ethereum blockchain on which the majority of layer 2 symbols are based, has leapt 13.8% to $2,028.80 in the past month.

Buying Layer 2 symbols can be a perilous venture as a result of their boosted presence in the market. These symbols are reasonably tiny in dimension and have reduced trading volumes, making them prone to considerable variations and testing to anticipate long-term success.

According to Matteo Greco, a study expert at Fineqia International, the development of tokens is not lasting for the majority of situations, with only a 1% success rate, that is, one out of 100 attempts.

“There’s always a little bit of slim air behind the steps.”

Price efficiency is also uneven.

In 2023, Matic has actually seen a decrease of roughly 3%, while the gaming token Immutable has actually experienced a substantial increase of over 300% in worth, contrasted to Bitcoin’s 123% and Ether’s 69% growth.

“Enigmatic Figure Shrouded in Secret”
Tokens on Layer 2 serve as an indication of the overall sentiment bordering the affiliated tasks, yet their high volatility also makes them speculative in nature. Commonly, they are sluggish to acquire worth during a basic surge in the cryptocurrency market, and quick to be sold when sentiment comes to be unsure.

Although layer 2 symbols are a lot smaller contrasted to famous cryptocurrencies like bitcoin, their unpredictability makes them popular among energetic traders intending to make use of market trends.

“They can be very attractive financial investments although they can be really speculative,” stated Joshua Peck, chief financial investment policeman at hedge fund TrueCode Resources, whose fund buys matic. “For a token that’s down 97%, it doesn’t take a great deal of resources inflow for it to go 3 times, 4 times, five times in rate.”

Peck stated that due to the highly unstable market, energetic trading is one of the most appropriate strategy for these tokens.

The fate of layer 2 symbols remains unclear.

Certain professionals believe that these initiatives are important in increasing the real-world applications of blockchain innovation, such as Ethereum, into different sectors including money and video gaming.

Many projects and their symbols were launched as the crypto market grew in 2020, prior to sinking throughout the crypto wintertime of 2022.

“The area really feels ‘unserious’ today … in terms of having the ability to indicate an instance of something you ‘d like to run your organization or household’s individual finances on,” claimed Alyse Killeen, managing companion at financial backing company Stillmark.

Lots of capitalists agree that only projects with helpful sensible applications will survive.

“During durations of economic development, the distinction in between assets with solid usage cases and those without is not as pronounced. However, in a bearishness, the divergence between these 2 groups comes to be much more noticeable,” kept in mind Greco of Fineqia International.

“Properties that have excellent use cases are able to stand up to the sag although they obtain struck hard.”


Disclaimer: Not Investment Advice

it’s crucial to understand that the information provided here is not to be construed as investment advice. The crypto market is dynamic and highly speculative, and decisions should be made based on thorough personal research and consideration of individual risk tolerance. Always consult with financial professionals and conduct your own due diligence before making any investment decisions. The intention of this exploration is to present insights and trends, not to provide specific investment recommendations.

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