L2s in a Portfolio

The L2 Landscape and why it matters for portfolio construction

Traditionally, when investors wanted exposure to the Ethereum ecosystem, the asset of choice was obvious - ETH. However, the rollup-centric roadmap has led to a plethora of L2 options, each giving various levels of exposure to the execution fee suite (base fees, priority fees, MEV). The investment decision, similar to the Ethereum ecosystem, becomes complex and harder to navigate. Regardless, the L2 ecosystem has emerged as a critical component of crypto-asset investment strategies. Major L2 platforms like Base, Arbitrum, and Optimism have surpassed competing L1s in many KPIs (TVL, fees, DAUs, etc), demonstrating better product market fit. The L2 market is currently valued at over $17B, with over $50B in assets secured, indicating substantial influence in blockchain adoption. 

For portfolio construction, L2 tokens are often thought to represent a high-beta investment relative to ETH, making them attractive for investors seeking amplified exposure to Ethereum's ecosystem. However, the sector changes dynamically, suggesting that careful selection among L2 platforms is crucial to this end. In this report, we examine a few of the key metrics considered when adding L2s to a portfolio with the intention of exposure to the Ethereum ecosystem. 

Limitations

It should be noted that the statistical estimates below don’t consider their stability over time. Furthermore, this report intends to outline a framework for quantitatively considering assets in a liquid portfolio. Some assets may not yet be considered fully-fledged L2s at the time of writing. 

Returns

MNT has been the best-performing L2 since the beginning of 2024, returning ~76% to token holders. This rise in token price was accompanied by growth in its liquid staking token, METH which now stands at $1.5B. Its restaking liquid token, CMETH, which launched in late October, now stands at $630M. The growth of these liquid staking tokens, combined with Mantle’s incentive programs, saw TVL on the chain climb nearly 400% to $460M with 4M new users onboarded. The only other L2 to have a positive return over this period is MOVE; however, it only launched in December 2024. Below we show the returns of select L2s since January 2024 (or their token launch if after).