• Layer 2 tokens like Arbitrum and Optimism show weak momentum despite widespread adoption and technical use cases.
• Restaking protocols under Eigen Layer, including Lido and EtherFi, have not attracted investor capital or market growth.
• Ethereum remains the stronger investment, backed by institutional interest, better performance, and lower risk exposure.

A growing number of market participants are steering away from Ethereum-based Layer 2 and restaking tokens. Despite the advanced technology behind projects like Arbitrum, Optimism, zkSync, Lido, and EtherFi, recent cycles have shown limited institutional demand and lackluster price performance.

Layer 2 Tokens Lose Traction Despite Strong Technology

According to a recent post on X, it has been revealed that Layer 2 tokens gained significant attention in the previous cycle between 2021 and 2022. Projects like Arbitrum (ARB), Optimism (OP), zkSync (ZK), and Starknet offered scaling solutions built on Ethereum infrastructure. Optimism, for instance, powers Base, the Coinbase-backed Layer 2 network. Arbitrum also operates a thriving software-as-a-service business by enabling Ethereum Virtual Machine (EVM) compatibility across chains.

However, these developments have not translated into significant market momentum. Token performance has remained stagnant, with little upside movement across major Layer 2 assets. The technology remains functional and widely adopted, but price action has failed to reflect usage or activity.

Market observations show institutions have largely avoided exposure to these Layer 2 assets. There is no record of substantial accumulation from institutional buyers. Analysts tracking portfolio inflows and trading volumes have reported minimal interest in this segment, even during periods of broader market recovery.

Restaking Narrative Shows Limited Adoption

The restaking sector, primarily built around Ethereum’s staking economy, has also struggled to gain traction. The Eigen Layer ecosystem, which powers this narrative, allows Ethereum validators to restake for added utility or network support. The concept enables users to lend out consensus influence while earning additional yield.

Despite the innovation, tokens tied to this ecosystem have underperformed. Lido ($LDO), known as the original staking provider, has remained in a tight trading range for months. EtherFi ($ETHFI), along with others like Puffer, Swell, and Renzo, has also shown little price movement.

Although restaking aims to expand Ethereum’s security model to external protocols, adoption has been slower than expected. Token performance across these platforms has not indicated meaningful demand or long-term investor positioning.

Ethereum Remains the Stronger Option for Investors

In contrast, Ethereum (ETH) has maintained a more favorable risk-to-reward ratio compared to Layer 2 and restaking tokens. It continues to attract institutional capital and performs better under current market conditions. The asset’s lower volatility and stronger liquidity profile support its long-term role in investment portfolios.

While Layer 2s and restaking platforms show technical strength, they have not captured capital flows at scale. Ethereum itself remains the preferred choice, showing resilience and utility as both a network and an asset.