Ethereum L2 bridge deposits skyrocket after Dencun Upgrade

Ethereum (ETH) price breached the $4,000 psychological level on Monday but has failed to hold above it this week despite four successive attempts. The thrust came on the heels of the ‘buy the rumor sell the news event’ as the network geared up for the Dencun Upgrade, deployed on March 13.

Also Read: Ethereum Dencun Upgrade causes a flurry of L2 restoration queries

Ethereum L2 bridge verticals soar

Ethereum’s Dencun upgrade was a value addition for the community, delivering reduced transaction fees and confirmation times on Layer 2 (L2) networks. This is expected to open up so many more use cases for crypto.

Cognizant of this theory, freelance services marketplace Fiverr and OpenAI’s chatbot ChatGPT registered increased numbers of search users looking for how to restore an L2 back online.

Recent reports indicate that Ethereum L2 bridge deposits have increased with Arbitrum (ARB) leading the pack, according to data from Token Terminal.

The surge in deposits points to growing activity and usage of the L2 solution, likely inspired by the reduced transaction costs, enhanced network efficiency and cost effectiveness. The surge in deposits also points to growing adoption, reduced congestion on the Ethereum Mainnet, increased confidence and trust, and a general increase in use cases. The direct implication of the Dencun upgrade appear to be:

•  It has inspired a positive reception of the benefits drawn from L2 solutions, including but not limited to faster confirmation times and reduced transaction costs.
• The network is performing better with users enjoying lower gas fees for their on-chain transactions.
•  Users and projects are now more open to depositing their funds into L2 bridges as they believe in the security of their assets because the L2 solution is effectively interoperating with the Ethereum main chain.
• More decentralized applications (dApps), decentralized finance (DeFi) protocols, and other Ethereum-based services could be built atop Layer 2, expanding the use cases and utility of L2 solutions.

Ethereum L2 solutions, such as Optimistic Rollups and zk-rollups, help prevent the congestion and high transaction fees on the Ethereum network. To do this, they offload some of the transaction processing to secondary layers while still benefiting from the security of the Ethereum main chain.

Unfortunately, the purported growing adoption and utilization of Layer 2 scaling solutions is not yet reflected in Ethereum price, which remains below the $4,000 threshold. The histogram bars of the Awesome Oscillator are flashing red, showing the bears have a strong presence in the ETH market. However, their presence well above the midline shows the market is still leaning in favor of the upside.

A flip of the $4,093 range high into support would produce a higher high, likely encouraging more buy orders to facilitate a stronger uptrend.

ETH/USDT 1-day chart

Conversely, the Relative Strength Index (RSI) is dropping, suggesting falling momentum. If the bears have their way, Ethereum could provide a buying opportunity around the $3,722 support. If this buyer congestion level fails to hold, however, a lower low below this base would give the bears a chance to recover the market.