For a second there, Layer 1s were pumping like it was 2021.
Smart contract platforms, also known as Layer 1s, started the week with a bang as Ethereum’s ETH, Solana’s SOL, Avalanche’s AVAX and others were all up more than 3% as of midday New York time.
Investor sentiment was buoyed after the Bellatrix hard fork, the first stage of Ethereum’s much-anticipated Merge, was completed successfully earlier today.
However, a sharp reversal in global markets has seen crypto largely give up those gains.
Stock market indices like the S&P 500 and Nasdaq are also trading nearly 0.5% lower as of mid-afternoon New York time.
Ethereum Classic’s ETC is still up 4% on the day and 11% in the last week. The token briefly hit a two-week high above $42.
The project has continued to attract investors and also miners as the hash rate, which is the amount of computing power dedicated to securing a proof-of-work network, hit an all-time high of over 50 terahashes per second, according to 2miners.com.
ETH Borrow Rates Spike
The rate at which DeFi investors can borrow ETH also spiked after Alameda Research, the crypto trading firm, reportedly borrowed 10,000 ETH on Aave, worth over $15M as of Sep. 6.
Borrowing rates for assets on lenders like Aave and Compound increase when more people borrow a given asset, resulting in increased utilization.
Many traders appear to be positioning themselves for the Merge, as holders of ETH will find themselves with an equal amount of proof-of-work ETH, when the upgrade happens. This won’t be an airdrop but rather a mirrored copy of the ETH that users hold on the current Ethereum network.
This proof-of-work ETH, or PoWETH, will exist on Ethereum’s proof-of-work network, which will continue to exist even though the Ethereum community has signaled broad support for the transition to the proof-of-stake.
Layer 1 Trade
2021 was the year of the Layer 1 trade, as investors positioned themselves behind ETH rivals. Those who sold the top saw eye-popping returns. SOL and AVAX in particular defied gravity as both gained well over 1000% over the course of 2021.