What is a way of gauging the state of cryptocurrency without having to rely too heavily on its price movement?
Kaiko can tell you it’s L2s.
So far, since the election, the research firm’s L2 index has traded higher, which is — admittedly — perhaps not a huge surprise, given that all of crypto took on an optimistic outlook starting in November.
This index also tracks polygon. Polygon is also tracked.
As you can clearly see, Stacks is in the same group as Optimism. Arbitrum, Polygon, and Starknet are also included.
Remember that L2s have made a great comeback after being behind in the market for last year. There’s been a lot of debate about whether or not we have too many l2s.
There is still demand for the product.
For example, take a look at a Galaxy report that was published in November and projected $47 Billion worth of Bitcoin could be sold. “bridged into bitcoins L2s by 2030” — or roughly 2% of bitcoin’s circulating supply.
But let’s get back to data. There could be some positive catalysts ahead for L2s. Especially if the bitcoin narrative doesn’t take over as much in the future.
“Sector rotation is another potential tailwind for L2 assets. BTC dominated the crypto market in 2024, setting record highs before and after the U.S. election as institutional investors poured billions into spot BTC exchange-traded funds. However, the rally hasn’t yet extended beyond BTC, as has historically been the case. While the crypto market structure has evolved, a rotation to smaller assets remains likely as investors seek higher upside potential via high-beta tokens,” Adam McCarthy, a Kaiko analyst wrote.
Taking into account that the changing regulatory headwinds play a huge factor here — especially in Polygon’s case given that the SEC previously labeled MATIC a security — and perhaps the future’s looking a bit brighter.
McCarthy writes that while bitcoin investing is accessible for the majority, there are few opportunities to invest beyond this.
“While the broader crypto bull market has yet to fully extend to altcoins, evolving regulatory dynamics could serve as a catalyst for renewed interest. As policy shifts in Washington and investors explore opportunities beyond Bitcoin,” It is also known as L2. “positioned for significant growth in 2025,” He went on.
Crypto is a very exciting field right now.
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