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What is the best cryptocurrency investment?
The DeFi report, crypto analyst Michael Nadeau, kicks off his analysis highlighting Ethereum’s progress and current positive market conditions. He points out that Ethereum is expanding effectively through Layer 2 (L2) solutions, expects ETF trading by summer, and notes influential figures like Larry Fink discussing tokenization. Furthermore, with potential rate cuts on the horizon, Nadeau sees strong reasons to be bullish on Ethereum.
He is asking whether investors should hold Ethereum (ETH), L2 tokens, or both.
Analysts have some answers for you.
Which Ethereum (ETH) or L2 token is better?
Michael Nadeau’s X series of posts highlights the significant contributions and market positioning of the best Layer 2 (L2) solutions in the Ethereum ecosystem. He points out that L2 now holds 15% of Ethereum’s total locked value (TVL) and contributes 15% of its transaction fees. Additionally, they have 4.7x more active addresses and handle 6.7x more daily transactions than Ethereum’s Layer 1 (L1), with double the developer activity.
Despite this, L2s have only 2.4% of Ethereum 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 underappreciated with respect to their impact on the Ethereum network.
Investor Interest in L2 Tokens
With his in-depth analysis, the analyst finds that there could be potential investment opportunities in L2 solutions given their growing importance and current undervaluation. Investors may consider diversifying their portfolios to include both Ethereum (ETH) and major L2 tokens to maximize exposure to ecosystem growth and scalability advancements.
Nadeau explores 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 an example, Ethereum currently has over 123 million token holders.
Correlation with the ETH price
In conclusion, he states that L2 tokens also show a correlation with the price of Ethereum. 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.
Currently, Arbitrum (ARB) is ranked 38th on CoinMarketCap with a market cap of $2 billion. It is up 5.79% over the past 24 hours, trading at $0.820238 with a 24-hour trading volume of $257 million. Optimism (OP), on the other hand, is ranked 42nd at $1.92, with $248 million in 24-hour activity. Both are showing clear signs of growth and investor confidence despite the market downturn.
What will you choose ETH or L2 Token? Tell us.