Bitcoin market price($26.4K) dropped by -6.7% in the past 24 hours, according to cryptoquant. Some indicators that were signaling a price decline was in the cards.

- Bitcoin Open interest was showing the build up of short positions since at least mid July (open interest growing while price declined).

- The sell off was preceded by a period of low bitcoin demand in the US (negative Coinbase premium).

- From the On-chain perspective, we can see an increase in whale spending activity before and during the sell-off.

Sentiment remains negative as we can see in negative funding rates that traders are willing to go short currently.

The STH Exchange Inflow is within normal levels and is around 10K, yes not a lot but not critical either. Such low volumes have occurred many times over the past year.

According to Coinglass data, a total of 176,752 traders were liquidated in the last 24 hours. 90% of these selloffs occurred in the last 12 hours, indicating a rapid increase in price volatility just days after BTC and ETH posted their lowest daily volatility in several years.

Among the sea of traders who lost a significant chunk of their derivative positions, two particular liquidations caught the crypto community’s eye for the sheer scale of it, wrote CoinTelegraph.

During the price slump, an investor on Binance’s ETHBUSD contract was liquidated at $1,434.37 losing $55.9211 million, making it the largest liquidation for the day. Another Binance trader on the BTCUSDT contract lost nearly $10 million in liquidations.

Ethereum scaling solutions have been getting an increasing amount of traction in the past few months. New layer 2s (L2s) are launching almost every week now as competition in the space heats up. The most recent launch to quickly attract users was Coinbase's Base L2, according to IntoTheBlock. 

Built on top of the OP Stack, Base is a separate L2 built with the same infrastructure as Optimism, but with its own set of sequencers batching transactions onto Mainnet. Within just a few weeks of launching Base surpassed Optimism in terms of daily transactions but has since fallen back lower.

Optimism Momentum - The Optimism network and OP token have been gaining steam recently

• Optimism transactions hit a new all-time high on Wednesday, surpassing Arbitrum transactions for the first time in 2023
• Sam Altman's Worldcoin launch on Optimism a few weeks ago contributed to the rise in transactions as users claim WLD tokens
• Though Base transactions are not settled on Optimism's network, part of the fees Coinbase earns are shared with the Optimism DAO, helping boost its revenues.
• These factors have helped support the OP token, which has decreased by just 1% over the past 30 days, compared to ARB's -18% and MATIC's -20% performance.

As competition between L2s grows, it becomes clear that Ethereum benefits.

The number of transactions processed between Ethereum Mainnet and the major optimistic rollups hit their second largest value in history.

• The prior high set in March 2023 took place on the day of the ARB airdrop, which distributed $1.7B in tokens to users
• The total number of transactions including L2s are now roughly 3x higher than during the bull market peak, when activity only took place on mainnet
• Despite L2's growth, Ethereum mainnet does not seem to be meaningfully cannibalized as transactions there remain at ~1M/day, just as they were a year ago 

Additionally, Ethereum appears to be benefitting from each rollup attracting slightly different audiences.

Arbitrum Dominating DeFi - The Arbitrum ecosystem remains the most liquid and active for financial applications.

• Arbitrum's TVL and daily volume numbers outpace all L2s and most L1s per DeFi Llama data
• Within just a few weeks Base already has accumulated $170M in TVL, surpassing Cardano and Bitcoin

EIP-4844 Catalyst - The upcoming Ethereum Dencun upgrade implements an improvement proposal expected to decrease L2 transaction costs by 10x-100x.

• While the timeline for the Dencun launch has not yet been made official, it is likely to take place in the fourth quarter of the year
• More clarity on the launch date is likely to come after the Devnet 8 testnet goes live next week, where Ethereum developers will be implementing all improvement proposals set to be included in Dencun
• Both optimistic and zero-knowledge (ZK) rollups will benefit from this scalability improvement, and are expected to attract more users as costs decrease by an order of magnitude

Overall, despite market volatility, it seems that L2s for Ethereum have been a bright spot. Optimism has gained momentum with the OP Stack becoming quickly adopted.

Base has become one of the fastest growing chains. And Arbitrum continues to dominate DeFi even if it's getting less attention than it did shortly after the airdrop. All of these L2s are poised to benefit greatly from the implementation of the Dencun upgrade and ultimately help push Ethereum towards broader adoption.

Last article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Rubikkav.

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