In the anticipation of the upcoming Dencun update, major cryptocurrencies Ethereum Layer-2 tokens are experiencing a downturn. Leading assets including MATIC, IMX, OP, ARB, and MNT have suffered price declines, with whales actively offloading these tokens. Despite these moves, Ethereum still maintains a value above $4,000. Contrasting Ethereum’s stumble, Bitcoin has soared to a new high, briefly touching $73,000.
Layer-2 Token Sell-Off by Whales Triggers Price Drop
The sell-off occurred a day before the Dencun Hard Fork, with significant assets like MATIC and ARB dropping around 4% in value. The trend continued across various altcoins with IMX falling 5% on Binance and MNT causing a 3% loss for its investors. Large-scale investors, known as whales, are contributing to this trend by exchanging their Layer-2 holdings for stablecoins or other cryptocurrencies.
Controversy Surrounds Ethereum’s Scaling Strategy
The choice by Ethereum to prioritize Layer-2 solutions for cost reduction over enhancing its main blockchain scalability has drawn criticism. Justin Bons, CEO of CyberCapital, has voiced concerns over Ethereum’s heavy reliance on these secondary chains and the lack of a concrete plan to scale the main network.
On-chain data reveals whale activities that might explain the recent price drops. Spotonchain identified two major transactions where large amounts of ARB were moved to Binance, likely causing the market dip for Layer-2 tokens. Despite the sell-off, Ethereum’s price reached an annual peak of $4,093 on Binance, but it remains to be seen if it can surpass its previous high of $4,868 post-update.
As the crypto community watches, the movement of whales and the Dencun update’s impact on prices are of particular interest. Ethereum’s strategy and the reaction of its price to such market activities remain key points of observation for investors and analysts alike.