Despite concerns about network congestion and high gas fees, ethereum remains bullish in the long term, according to Rollbit partner borovik.eth, which aware in X on December 26. Key factors driving the positive outlook point to ethereum's developer ecosystem, its role in the broader blockchain ecosystem, and the launch of numerous Layer 2 (L2) solutions.
Will Layer 2 Activity Drive eth to New Highs?
Borovik.eth remained sideways and bullish on eth, even with Solana (OSL) and other layer 1 coins like Cardano (ADA) skyrocketing in 2023. In the analyst's view, ethereum's scaling challenges are manageable, believing developers They will find ways to “resolve this concern permanently in the long term.”
Based on this optimism, the Rollbit partner believes that eth will likely recover strongly in the coming sessions considering the level of development, especially of the layer 2 scaling options intended for the pioneering smart contract platform. According to Borovik.eth, the development of layer 2 off-chain options backed by massive companies, e.g. Coinbase, a crypto exchange and venture capitalists (VC), positions ethereum (eth) favorably for a bull run.
As of December 26, eth remains in an uptrend but is cooling off after strong gains in Q4 2023. At spot rates, eth is underperforming most Layer 1 platforms like Injective Protocol (INJ) and Solana (SOL), whose prices rose, reaching new 2023 highs. eth prices are still trending below $2,400, a critical resistance level. If the bulls break this line, eth may fly towards $3,500 or higher in the coming months.
The increase in SOL's valuation, especially in the second half of 2023, has led to a comparison with eth. Still, most traders are optimistic. Arthur Hayes recently stated that users should start rotating funds from SOL to eth, an endorsement of the second most valuable coin by market capitalization.
ethereum Layer-2 manages more than $18.8 billion
While ethereum faces challenges related to on-chain scaling, developers have been working hard to solve this problem. The launch of layer 2 off-chain options through rollups has been key in this push. Most of these solutions, including Arbitrum and Optimism, have been instrumental in relieving pressure from the main grid, thereby reducing gas rates. According L2Beat, Layer 2 protocols manage more than $18 billion as total value locked (TVL). There are also 34 active projects and 23 more in development.
Among the big companies joining the layer 2 journey is Coinbase, where through Base, users can make low-cost transactions while relying on the ethereum mainnet for security. According to Borovik.eth, over 60% of Base's revenue comes from accumulated fees collected, highlighting the importance of its scaling solution and the role ethereum plays in all of this.
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The next Dencun update, which will be integrated next year, will further reduce layer 2 rates. The developers plan to launch this update on the Goerli testnet in mid-January 2024.
Featured image from Canva, TradingView chart
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