Layer 2 Duds 📉

Despite a strong rally in the broader crypto market, major layer 2 tokens have struggled in 2024. Arbitrum has dropped 66%, Optimism is down 56%, Starknet has plummeted by 84%, and even the freshly-launched ZKsync is down 55%.

What’s causing the decline? Thomas Bautista from GSR points to a big increase in circulating supply, putting sell pressure on these tokens. Ethereum has placed significant faith in layer 2 solutions, but it appears the market doesn’t have the same enthusiasm—yet. And with more token unlocks on the way, the selling may continue.

Currently, over 40% of all Arbitrum tokens are circulating, 29% for OP, and just 19% for Starknet, hinting at even larger supply shocks to come.