Second-layer platforms launched on the top of Ethereum (ETH) blockchain see metrics at mid-October levels. Why?
The net volume of assets locked in protocols on various second-layer platforms atop Ethereum (ETH) has plummeted over the past two months. Analysts are wondering about the possible reasons for this dramatic drop.
Since early April, Ethereum L2s are down by 40%
Seasoned analyst Patrick Hansen, crypto venture advisor at the Presight Capital VC fund, has taken to Twitter to share the bearish dynamics of Ethereum-based second-layer platforms.
He noticed that the total locked value (net value of assets injected into various protocols) of Ethereum’s L2s had fallen to yearly lows. In fact, they’ve fallen to $4.4 billion in equivalent. The last time this value was so low was in mid-October 2021.
L2s started losing steam in early April: their TVL dropped by 40% since. Mr. Hansen stressed that this decline took place despite massive liquidity incentives and token farming programs.
As such, we can be sure it was too early to speak of an L2 breakthrough, Mr Hansen admits:
But the breakthrough of Ethereum L2 this year was considered a certainty by Ethereum-Maxis. For now, that couldn’t be further from the truth, even before the crashes of the past few weeks. The use of L2 is limited at best.
Questions to be answered
At the same time, to see the actual picture of what pushes L2s’ TVL down, we need to consider the correlation between L2s and L1s, the power of incentivization programs and the roles of different factors in these dynamics, Mr. Hansen concludes.
Ethereum DeFi is also heavily impacted by the current market downturn. According to data posted by aggregator DeFiLlama, DeFis lost 40% TVL in just 30 days.
Now, the net volume of assets locked in DeFis is sitting at $67.92 billion, down almost $100 billion from the historic maximum registered in November 2021.
