CELO price shoots up 15% as Celo aims to transition to Ethereum L2 from independent L1 blockchain
|- CELO price observed an increase of nearly 20% at its peak during the day, making it the highest single-day rise this year.
- A new proposal aims to bring the network back to Ethereum from being an EVM-compatible chain.
- The total value locked on Ethereum Layer-2 has risen by 145% YTD. The DeFi market has grown by just 38% in the same duration.
Celo is “returning home,” as the crypto community calls what is a transition of the Layer-1 (L1) blockchain back to an Ethereum-based Layer-2 (L2) blockchain. Bound to affect the native token’s price, the impact was larger than expected, and as per experts, the impact on the network would also be huge in the long term.
CELO price rises after homecoming proposal
Celo developers cLabs proposed a transition of the Celo blockchain from Layer-1 to Layer-2 on Ethereum. Before becoming an independent EVM-compatible L-1 blockchain, Celo used to be an L2 and is now going back to being one due to multiple reasons.
One of the biggest focuses of this transition is to improve and provide a seamless developer experience. Additionally, moving back to being an Ethereum L2 would provide stronger security assurance than Celo individually could. Furthermore, this would simplify liquidity sharing between Celo and Ethereum by creating a trustless bridge between the two.
— Token Terminal (@tokenterminal) July 15, 2023
— Token Terminal (@tokenterminal) July 15, 2023
Celo’s native token naturally observed the positive impact of this proposal as CELO price rose significantly within a day. Up by almost 15% at the time of writing, the altcoin is trading at $0.588, nearing $0.600 to recover the early July dip. During the intra-day trading hours, the cryptocurrency hit highs of almost 20%, securing which would have marked the highest single-day rise for CELO.
CELO/USD 1-day chart
Experts look at this transition as an opportunity for Celo to grow rapidly. Kelvin Koh, founding partner at Spartan Group, stated,
“If Celo had done this pivot 2 years ago, their FDV would probably be 10-20x what it is today.
The comment does make sense in the current market conditions where Layer-2 projects have seen much larger growth than the entire decentralized finance (DeFi) market. Since the beginning of 2023, the total value locked on L2 chains has increased from $4.1 billion to $10.07 billion at the time of writing, noting a 145% growth.
Layer-2 chains’ TVL
The DeFi market, on the other hand, has ballooned by just 38% in the last six and a half months, with the total value locked on DeFi applications rising from $52 billion to $72 billion.
Thus, Celo’s decision to convert into an Ethereum L2 could serve it well if the users see this as a technical upgrade that it stands to be and not a drawback.
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