Cryptoverse: 'Layer two' tokens enjoy new life as bitcoin soars
channelnewsasia.comIt's next-level stuff."Layer 2" cryptocurrencies native to projects built on top of "layer 1" blockchains such as Bitcoin and Ethereum - have found a new lease of life after a year in the doldrums, buoyed by a rising crypto tide.Anticipation of easing US borrowing costs and a possible US spot bitcoin exchange-traded fund have lifted crypto prices since the summer, with market bitcoin gaining by about half since the end of August.Tokens associated with layer 2 projects - which typically aim to speed up transactions and cut costs - have a combined market cap of about US$14.3 billion, about a tenth of the total crypto market, according to data from CoinMaketCap.com.Matic, the largest layer 2 token with a market cap of US$6.90 billion, has jumped 20 per cent to US$0.74 over the past 30 days, according to CoinGecko.
It's used on Polygon, a platform that reduces congestion on the Ethereum network.The next four largest coins - immutable, mantle, arbitrum and optimism - have leapt between 9 per cent and 105 per cent over the past month and trade between US$0.5 to under US$2 apiece.All five tokens are down between 16 per cent and 86 per cent from their all-time highs hit over the past two years, though.Ether, the layer 1 token linked to the Ethereum blockchain on which most layer 2 tokens are based, has leapt 13.8 per cent to $2,028.80 in the past month.Layer 2 tokens, which have proliferated in recent years, can be a risky business.
They are small and thinly traded, meaning they can be highly volatile and unpredictable. Picking long-term winners is tough."On average, the growth is not sustainable for those tokens ...
100 try and one wins," said Matteo Greco, research analyst at digital asset and fintech investment firm Fineqia International."There's always a bit of thin air behind the moves."Price performance is also patchy.Matic has fallen about 3 per cent in 2023, while gaming token immutable has more than tripled in price, versus bitcoin's 123 per cent and ether's 69 per
