Ethereum related tokens are expected to extend their gains this week as anticipation of a Spot Ether ETF brews among market participants in the US. Bitcoin Spot ETF approval ushered an injection of large volumes 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 posted gains in the past 24 hours.
MATIC price could make or break Layer 2 rally
The largest Ethereum scaling token is at the brink of a 16% correction, unless MATIC sees a daily candlestick close above $0.7725, the May 6 peak. The climb would mark an increase of nearly 11% in MATIC.
The level holds significance since it represents the upper boundary of the bearish descending triangle that MATIC price has formed.
As seen on the 1-day price chart, MATIC price is in a descending triangle pattern formed between March 18 and May 21. Typically, this pattern leads to further correction in the asset. In the case of MATIC, the Layer 2 token could wipe out 16% of its value and sweep liquidity at the April 13 low of $0.5885.
If MATIC price extends its losses further, it could nosedive 28% from the current level, to October 2023 low of $0.5025.
MATIC/USDT 1-day chart
MATIC leads the pack of Layer 2 tokens, the altcoin’s price trend could therefore influence the rallies of other assets like IMX, OP, STX, among others. As the total value of cryptocurrencies locked (TVL) of Layer 2 chains climbs, it represents the sentiment among market participants and this sector could see a significant impact from two factors:
- Ethereum Spot ETF decision by the SEC
- Crypto regulation in the US
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. Data from the crypto tracker Cryptorank.io shows the total value locked on Layer 2 chains.
TVL of Layer 2 chains
At the time of writing, Ethereum is up nearly 3% on Monday.
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