Layer 2 Tokens Strengthen as Spot Ethereum ETF Anticipation Spreads Among ETH Holders

05/20/2024 3:29:53 PM ET

Ethereum-related tokens are expected to increase their gains this week as anticipation of a Spot Ether ETF spreads among market participants in the United States. The approval of the Bitcoin Spot ETF ushered in a large-volume injection of institutional capital into the asset, pushing BTC to its new all-time high in 2024.

ETH holders expect a similar response if the US SEC approves a Spot Ethereum ETF.

Layer 2 tokens Polygon (MATIC), Immutable (IMX), Mantle (MANTLE), Stacks (STX), and Optimism (OP) have recorded gains in the last 24 hours.

MATIC price could make or break the level 2 rally

Ethereum’s largest scaling token is on the verge of a 16% correction unless MATIC sees a daily candle close above $0.7725, the May 6 peak. The climb would mark a nearly 11% increase in MATIC.

The level is significant as it represents the upper limit of the bearish descending triangle formed by the MATIC price.

As seen on the daily price chart, MATIC price is in a descending triangle pattern formed between March 18th and May 21st. Typically, this pattern leads to further asset correction. In the case of MATIC, the Layer 2 token could wipe out 16% of its value and wipe out liquidity at the April 13 low of $0.5885.

If MATIC price extends its losses further, it could collapse 28% from the current level, to the October 2023 low of $0.5025.

MATIC/USDT daily chart

MATIC leads the pack of Layer 2 tokens, the price performance of the altcoin could therefore influence the rallies of other assets such as IMX, OP, STX, among others. As the total value of cryptocurrencies locked (TVL) of

Layer 2

chains on the rise, represents the sentiment among market participants and this sector could see significant impact from two factors:

• SEC Decision on Ethereum Spot ETF

• Cryptocurrency regulation in the United States

The top 5 Layer 2 chains with the highest TVL are Arbitrum with $5.26 billion, Blast with $2.86 billion, Base with $1.93 billion, Optimism with $1.19 billion and LineaBuild with 703 million dollars. Data from crypto tracker Cryptorank.io shows the total value locked on Layer 2 chains.

TVL of level 2 chains

At the time of writing, Ethereum was up nearly 3% on Monday.

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