Investors lean towards Layer 1 tokens for their crypto portfolio allocations

Crypto

Sygnum’s Future Finance Report found the Layer 1 sector as the most appealing sector for institutional and professional investors.

  • Layer 1 tokens like Bitcoin and Ethereum continue to capture investors’ attention, but the emergence of competitor chains as new “blue-chip” tokens hints at expanding interest within the sector.
  • Advancements in Layer 2, DeFi, and Web3, though sometimes overshadowed in the broader market, are drawing investor interest, signalling a shift towards token sector diversification within crypto portfolios.

Source: Sygnum Future Finance Report 2023

Over 90 percent of survey respondents have expressed a strong interest in the Layer 1 sector (L1), primarily driven by the appeal of well-established assets like Bitcoin and Ethereum. However, protocols such as Solana and XRP may also be earning their place as maturing assets, while other foundational layers like Avalanche, Cosmos, and TRON, are showing signs of healthy user activity and ecosystem growth. Meanwhile, the rising demand for sector-specific chains like AI-linked Injective, THORChain’s cross-chain decentralised exchange, and Celestia’s blockchain modularity protocol, are demonstrating their ability to address specific industry bottlenecks and user demands.

What is driving Layer 1 growth in 2024?

Bitcoin continues to have strong drivers as ETF inflows are expected to increase over the year, while its platform capabilities through BRC-20 tokens is leading to strong transaction volume growth. The anticipation of the upcoming Bitcoin halving, supporting one of its core value propositions as a store of value asset, will also continue to drive investor interest. Ethereum, the leading smart contract platform, has several upcoming catalysts with the Surge scalability upgrade and potential spot ETF approvals bringing fresh demand for Ether.

The growing demand for block space also puts the spotlight on alternative blockchain designs and high-performance networks, which have allowed them to outperform in terms of speed, reliability, and low transaction fees. This includes Solana’s remarkable performance in 2023, especially as it has now become a favoured platform for the rapidly expanding DEPIN application niche, including AI-linked projects.

Interest and trends beyond Layer 1s 

The Layer 2 sector was of interest to 60 percent of survey respondents, while the demand for scalability and the rise of AI further escalating the need for scaling solutions will continue to unlock new opportunities in this sector. DeFi remains a popular sector, as indicated by 52 percent of respondents, with emerging trends such as real-world asset (RWA) tokenization, liquid staking and new market segments such as Ethereum re-staking likely to expand sector interest throughout 2024.

It’s encouraging to see interest in a variety of crypto sectors, particularly in Web3 (47 percent), which has performed exceptionally well throughout 2023. The broader Web3 sector appears to offer a number of opportunities as the market rewards improved interoperability solutions. Rising user growth in the DEPIN niche remains strong and the proliferation of AI catalyses demand for the services of numerous protocols in this sector.

Learn more about our Future Finance Report here: Future Finance 2023 – Reports | Sygnum Bank

Learn more about sector trends and drivers here: Q1 2024 Crypto market sector snapshot – Research & Education | Sygnum Bank – Invest in crypto with a regulated Swiss bank 

Disclaimer: The information in this publication pertaining to Sygnum Bank AG (“Sygnum”) is for general information purposes only, as per date of publication, and should not be considered exhaustive. This publication does not consider the financial situation of any natural or legal person, nor does it provide any tax, legal or investment advice. This publication does not constitute any advice or recommendation, an offer or invitation by or on behalf of Sygnum to purchase or sell any assets. No elements of precontractual or contractual relationship are intended. While the information is believed to be from accurate and reliable sources, Sygnum makes no representation or warranties, expressed or implied, as to the accuracy of the information. Sygnum expressly disclaims any and all liability that may be based on such information, omissions, or errors thereof. Any statements contained in this publication attributed to a third party represent Sygnum‘s interpretation of the data, information and/or opinions provided by that third party either publicly or through a subscription service, and such use and interpretation have not been reviewed by the third party. Sygnum reserves the right to amend or replace the information, in part or entirely, at any time, and without any obligation to notify the recipient of such amendment / replacement or to provide the recipient with access to the information. Simultaneously, there is no obligation of Sygnum to inform recipients of information, if before provided information later becomes outdated, inaccurate or obsolete, unless otherwise provided by applicable law. The information provided is not intended for use by or distributed to any individual or legal entity in any jurisdiction or country where such distribution, publication or use would be contrary to the law or regulatory provisions or in which Sygnum does not hold the necessary registration, approval authorisation or license. Except as otherwise provided by Sygnum, it is not allowed to modify, copy, distribute or reproduce, display, license, or otherwise use any content for commercial purposes.

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The information in this publication pertaining to Sygnum Bank AG (“Sygnum”) is for general information purposes only, as per date of publication, and should not be considered exhaustive. This publication does not consider the financial situation of any natural or legal person, nor does it provide any tax, legal or investment advice. This publication does not constitute any advice or recommendation, an offer or invitation by or on behalf of Sygnum to purchase or sell any assets. No elements of precontractual or contractual relationship are intended. While the information is believed to be from accurate and reliable sources, Sygnum makes no representation or warranties, expressed or implied, as to the accuracy of the information. Sygnum expressly disclaims any and all liability that may be based on such information, omissions, or errors thereof. Any statements contained in this publication attributed to a third party represent Sygnum‘s interpretation of the data, information and/or opinions provided by that third party either publicly or through a subscription service, and such use and interpretation have not been reviewed by the third party. Sygnum reserves the right to amend or replace the information, in part or entirely, at any time, and without any obligation to notify the recipient of such amendment / replacement or to provide the recipient with access to the information. Simultaneously, there is no obligation of Sygnum to inform recipients of information, if before provided information later becomes outdated, inaccurate or obsolete, unless otherwise provided by applicable law. The information provided is not intended for use by or distributed to any individual or legal entity in any jurisdiction or country where such distribution, publication or use would be contrary to the law or regulatory provisions or in which Sygnum does not hold the necessary registration, approval authorization or license. Except as otherwise provided by Sygnum, it is not allowed to modify, copy, distribute or reproduce, display, license, or otherwise use any content for commercial purposes.

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