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Layer Two Digital Tokens Rise With Crypto Rally

Yolowire - Tue Nov 28, 2023

Lesser known ‘Layer 2’ digital tokens are rallying along with the broader %Cryptocurrency market.

Layer 2 tokens are cryptos that are built on top tier ‘Layer 1’ assets such as %Bitcoin ($BTC) and %Ethereum ($ETH).

Cryptocurrency prices are rising on expectations that central banks are done raising interest rates and that Bitcoin exchange-traded funds (ETFs) will soon be approved by U.S. regulators.

Smaller digital tokens associated with Layer 2 projects have a combined market capitalization of about $14.3 billion U.S. and comprise about one-tenth of the total crypto market worldwide.

Matic, the largest Layer 2 token, has seen its price increase 20% to $0.74 U.S. over the past 30 days, according to data from CoinGecko. It's used to reduce congestion on the Ethereum network.

The next four largest Layer 2 cryptos, called Immutable, Mantle, Arbitrum and Optimism, have seen their prices rise between 9% and 105% over the past month.

The rise in smaller cryptocurrencies comes as Bitcoin’s price has increased 125% this year to $37,500 U.S., and Ethereum’s price has grown 70% to $2,035 U.S.

Layer 2 tokens are smaller and more thinly traded than bigger Layer 1 cryptos such as Bitcoin and Ethereum. This makes them more volatile and unpredictable to buy and sell.

Many analysts warn that Layer 2 tokens are speculative in nature, and many have failed in recent years.

However, other analysts use Layer 2 tokens to gauge the overall investor sentiment in the cryptocurrency market.

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