Layer two (L2) solutions for the Ethereum (ETH) network have grown in importance over the past year due to the need for scalable networks that offer low-cost transactions. and have spawned numerous projects that built cross-chain bridges with competing blockchain networks.
One project that has benefited from the growth of L2 scaling solutions is Synthetix (SNX), a decentralized finance (DeFi) protocol that enables the creation of synthetic assets and offers exposure to derivatives and futures trading on the blockchain.
Data of Cointelegraph Markets Pro Y TradingView show that, since hitting a low of $4.44 on April 11, SNX price rallied 52.6% to hit a daily high of $6.78 on April 26, before a widespread market decline sent it back as low as $5.90.
Although most of the market is down, there are potential catalysts for the SNX price to appreciate further.
Launch on Optimism
One of the biggest milestones for the Synthetix protocol was its launch on Optimism, an L2 network that is making waves this week thanks to an airdrop announcement. SNX staking began on January 16, and as the network grows, speculators are drawn to the prospect of future airdrops and staking incentives.
Recently, Synthetix took advantage of its launch in Optimism to get more involved in the “Curve Wars” and currently offering the biggest “bribe” to get veCRV voters to incentivize voting for Curve’s sUSD pool.
Synthetix has also partnered with Lyra Finance (LYRA) to offer 12,000 SNX and 50,000 LYRA per week as an additional incentive for veCRV voters.
L2 release season could be a catalyst for SNX
A second reason why the SNX price may continue to appreciate is the expectation of traders for an L2 protocol release season.
There has been a significant amount of speculation that Optimism and Arbitrum, two of the most popular L2 networks in the cryptocurrency ecosystem, would eventually release their protocol tokens to early adopters of the networks.
This speculation came true after Optimism to publish initial details of the Optimism Collective, a “large-scale experiment in digital democratic governance” which is “built to drive rapid and sustainable growth of a decentralized ecosystem.”
Along with the launch of the Optimism Collective comes the launch of the OP governance token, of which 5% of the initial supply will be airdropped to early adopters. For those who did not qualify for the first round of distribution, there is still a chance to qualify for future releases if they are active on the network using protocols like Synthetix.
Since Synthetix offers futures trading on Optimism, the protocol could benefit from users looking for ways to be active on the network and this could increase the demand for SNX.
In addition to the possibility of receiving a piece of the OP airdrop, SNX users have also been attracted by the 81% rewards currently offered by the protocol.
Increased user base and transaction volume
Further proof of Synthetix’s growing popularity is found in the platform metrics on Optimism, which have increased steadily over the past month according to data from Dune Analytics.
As shown in the graph above, the number of unique traders on the protocol has been on the rise since the launch of futures trading in mid-March and the protocol has moved nearly $1.59 billion in total volume.
VORTECS™ data from Cointelegraph Markets Pro began spotting a bullish outlook for SNX on April 23, prior to the recent price rally.
Exclusive to Cointelegraph, the VORTECS™ Score is an algorithmic comparison of historical and current market conditions derived from a combination of data points including market sentiment, trade volume, recent price movements, and online activity. Twitter.
As seen in the graph above, the VORTECS™ Score for SNX climbed into the green zone and reached a high of 77 on April 23, some 39 hours before the price shot up 28% over the next day.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should do your own research when making a decision.
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