Ethereum
What is the best cryptocurrency investment?
DeFi Report crypto analyst Michael Nadeau launches his analysis in highlighting Ethereum’s progress and current positive market conditions. He points out that Ethereum is scaling efficiently thanks to Layer 2 (L2) solutions, anticipates ETF trading by summer, and notes that influential figures like Larry Fink are discussing tokenization. Additionally, with potential rate cuts on the horizon, Nadeau sees strong arguments for being bullish on Ethereum.
He wonders whether investors should hold on Ethereum (ETH), L2 tokensor both.
Analysts have some answers for you.
Which Ethereum (ETH) or L2 tokens are better?
Michael Nadeau’s X-rated post series strong points the significant contributions and market positioning of the best Layer 2 (L2) solutions in the Ethereum ecosystem. He highlights that L2s now hold 15% of Ethereum’s total value locked (TVL) and contribute 15% of its transaction fees. Additionally, they have 4.7x more active addresses and process 6.7x more daily transactions than Ethereum’s Layer 1 (L1), with twice as much development activity.
Despite this, L2s comprise only 2.4% of Ethereum’s token holders, represent only 9% of Ethereum’s fully diluted market capitalization, and represent only 2.7% of its circulating market capitalization. This disparity suggests that L2s may be undervalued relative to their impact on the Ethereum network.
Investor Interest in L2 Tokens
Through his in-depth analysis, the analyst notes that there could be potential investment opportunities in L2 solutions given their growing importance and current undervaluation. Investors may want to consider diversifying their portfolios to include both Ethereum (ETH) and major L2 tokens to maximize exposure to the ecosystem’s growth and scalability advancements.
Nadeau asks whether investors are inclined to hold L2 tokens. He notes that OP and ARB are the most popular L2 projects based on token holders. As a reminder, Ethereum currently has over 123 million token holders.
Correlation with ETH price
In conclusion, he mentions that L2 tokens also show a correlation with Ethereum price. ARB has a historical correlation coefficient of 0.70 with ETH, while OP has a correlation coefficient of 0.61, indicating a significant but not perfect correlation.
NOW, Arbitration (ARB) is ranked 38th on CoinMarketCap with a market cap of $2 billion. It increased by 5.79% in the last 24 hours, trading at $0.820238 with a 24-hour trading volume of $257 million. Considering that, Optimism (OP) is ranked 42nd at $1.92 with $248 million in 24-hour activity. Both are showing strong signs of growth and investor confidence despite the slowing markets.
Read also: Ethereum Supply Increases After Dencun Upgrade: What It Means for Investors
What will you choose for ETH or L2 tokens? Tell us.