The Ethereum ecosystem features numerous second-layer blockchains (L2s) that regularly release large amounts of their native tokens, creating notable selling pressure and potentially causing price declines over time as private investors offload tokens to retail participants.
This week, data from TokenUnlocksApp reveals that two well-known Ethereum L2s are set to unlock nearly $100 million worth of tokens. Specifically, out of the $116.86 million unlocked from 13 cryptocurrencies from September 14 onwards, Arbitrum (ARB) and Starknet (STRK) will be responsible for $74.69 million. This translates to a 2.7% and 3.6% increase in circulating supply for ARB and STRK, respectively.
Arbitrum leads the way by unlocking 92.65 million ARB worth $49.17 million on September 16, with Starknet following closely with a 64 million STRK unlock valued at $25.52 million on September 15.
There is an ongoing debate in the Ethereum community regarding layer-2 scaling. Vitalik Buterin, Ethereum’s creator, previously envisioned a future for cryptocurrencies based on proof of stake and sharding, highlighting the potential efficiency gains. However, Ethereum shifted its focus to layering the blockchain after encountering challenges with implementing sharding technology.
Meanwhile, MultiversX (EGLD) successfully integrated all three types of sharding, earning praise as the “technological Holy Grail of crypto.” Criticism has also been directed at Ethereum’s layer-2 scaling model, with concerns raised over the centralization and parasitic nature of second-layer systems in relation to ETH tokens.
Unlocks of tokens in Ethereum L2s, like Arbitrum, can lead to price losses over time due to significant selling pressure from early private allocations being released onto the market. Investors and traders are advised to monitor these token unlocks closely to avoid falling prey to others’ exit strategies, as these dumps can impact the future price performance of these digital assets.
*[Disclaimer: The information presented here should not be taken as financial advice. Investing in digital assets carries risks, and capital is at risk.]*