An Ethereum (ETH-USD) ETF may appear sooner than skeptics expected. Repeating the history of Bitcoin (BTC-USD) ETFs, this exchange-traded fund may receive an unprecedented influx of institutional capital. Traditional investors will provide an inflow of liquidity to the crypto ecosystem, which would be a goldmine for layer 2 scaling solutions.

Optimism (OP)

Optimism (OP-USD) has strengthened its role as a layer 2 (L2) solution. OP is a tool for voting and project management in the Optimism Collective community. DefiLlama has highly rated the token, which indicates significant DeFi benefits for the holders.

The total blocked value (TVL) now exceeds $700 million. At the same time, Optimism continues to house 97 protocols Uniswap and has several partnerships with high-level projects. A slight slowdown in the first weeks of 2024 did not affect the benefits for the token holders. As of January 26, about 90% of these holders have made a profit.

The project remains adaptive and compatible with EVM. That is why the approval of the Ethereum ETF will bring benefits to OP holders. If the Ethereum ETF is passed, new investors and users in the Ethereum ecosystem will increase activity on the network. This will complicate the current scalability of Ethereum and make transaction fees more expensive. Optimism can reduce confirmation time. This L2 solution can make working with Ethereum more efficient. Optimism’s unique value proposition will increase the demand for OP, and its price will follow.

Avalanche (AVAX)

Avalanche (AVAX-USD) started 2023 with a price close to $10. But over the year, it showed incredible results, reaching $48. The decline in early 2024 to the level of $28 was not long-lasting, and just a week later, 1 Avalanche token was already worth more than $35. At the end of January 2024, the price of AVAX has risen by about 10%, while the main assets (Bitcoin, Ethereum, and Solana) have risen by about 5% or less. And the expectation of future innovations (like Vryx) played a role in the project’s positive performance.

The project with a market capitalization of $13 billion retains its status among the top 10 cryptocurrencies and attracts the attention of investors. This is confirmed by the December figures. Back then, the trading volume consistently exceeded $1.5 billion.

Even during peak usage cycles, Avalanche can maintain low fees. This unusual feature helps to attract a large client base. Last year, the project managed to pass the 1 million monthly active users mark. 

AVAX is not a direct Ethereum scaling solution, but it boasts characteristics that position it as a potential beneficiary of an Ethereum ETF. This smart contract platform is EVM-compatible. Thanks to its unique consensus mechanism, Avalanche is an effective alternative for users who don’t want to pay high fees. On the other hand, developers may see AVAX as an attractive platform for deploying dApps. Rising awareness and interest in scalable alternatives due to Ethereum’s limitations and increased demand for it contribute to Avalanche’s rise.

Arbitrum (ARB-USD)

The demand for Ethereum is growing as the launch of ETFs approaches, and at the same time, the relevance of Arbitrum (ARB-USD) as a way to scale the second tier is increasing. Arbitrum’s Optimistic Rollups technology provides access to more cost-effective transactions while maintaining the same high level of security. It allows users to avoid high gas fees and long transaction processing times when dealing with the Ethereum network.

The value of Arbitrum tokens has been going through a difficult time after a 90% drop. But now, ARB is the key to the project’s decentralized autonomous organization with a market capitalization of more than $2.2 billion. Recent innovations only reinforce Arbitrum’s status. The introduction of Arbitrum Orbit AnyTrust chains and migration to the Nitro stack is another proof of the project’s innovation and competitiveness.

More than 250 ERC-20 projects have connected to Arbitrum. This result is hard to beat with other L2 solutions. Taking into account the demand for ARB and its technological advantages, analysts predict that Arbitrum will rise to $2.5 in February. 

The Arbitrum token has shown its stability during the bearish sentiment after the emergence of spot Bitcoin ETF. Back then, the price fluctuated between $1.65 and $1.96. Arbitrum’s TVL doubled in just one year to above $2.4 billion in January 2024. And this figure may increase immediately after the approval of the Ethereum ETF, which will also entail the value of ARB.

On the date of publication, Julia Magas did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.