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Why the inflow of funds to Ethereum continues, the background to the soaring price


Bitcoin market price

Cryptocurrency (virtual currency) market on the 4th. Bitcoin (BTC) prices fell back to 6.1 million yen ($ 55,720), down -4.07% from the previous day.

BTCUSD daily

Although it temporarily recovered to $ 59,000, it is in a situation where funds can easily flow to the alto market due to a sharp decrease in BTC dominance, and the upside is heavier before the milestone of $ 60,000.

With the return of the Alto season after 2021, the market share of “Bitcoin Dominance” has plummeted to the 40% level, which is the same level as during the cryptocurrency bubble three years ago.

BTC dominance

Analyst firm Santiment points out that the funding rate of the major derivative exchange BitMEX is at the latest lowest level. “The feeling of overheating has subsided,” he said.

Source: Santiment

Ethereum continues to update the highest price

The latest Ethereum (ETH) price has strongly outperformed Bitcoin (BTC), as it suggests a turning point in the market, such as Bitcoin’s sharp decline from the end of last month. The performance of + 29.1% month-on-week and + 62.2% month-on-month was significantly higher than that of Bitcoin + 3.5% month-on-week and -2.1% month-on-month.

ETH / USD weekly

Even when the BTC crashed last month, ETH stopped declining without breaking below $ 2,000, and the rate of decline was limited during the strong downturn that occurred mainly in Alto, which had been pumped until just before. The fact that it hit a new high with a strong backlash after that may have reaffirmed the importance of asset allocation to review Portophilio’s funding allocation.

Although there is a feeling of overheating at the moment, the inflow of funds continues due to the lack of a technical resistance line at the highest price update, and on-chain data also observed the buying of whales (large investors).

Relation:The shadow of a whale on Ethereum, the “DeFi market” is alive with a significantly higher binance coin

In recent years, cases of large-scale holdings by companies and large investors have been confirmed by following Bitcoin.

Relation:Nasdaq listed company buys virtual currency Ethereum for the first time in the United States

Fundstrat, a US investment fund, is shifting from Bitcoin to other segments such as Ethereum and DeFi (decentralized finance), according to a client report from Fundstrat Global Advisors released on April 29.

According to the report, regarding the introduction of the next improvement proposal “EIP-1559” of the major update “London” scheduled for July, the supply of ETH will be repurchased (burned) or destroyed (treasure stock) using a part of the network transaction fee. ), He said, “If the decrease in ETH supply due to the burn of the base fee exceeds the inflation rate, it may boost the price.”

It can be said that the tendency is remarkable even in the Bitcoin-denominated currency pair “ETH / BTC”, and ETH / BTC broke above the upside resistance line and switched to the range of the level for the first time in three years.

ETH / BTC weekly

At the moment, the market capitalization ratio (market size) of Bitcoin to Bitcoin is in the 30% range, but as the market environment changes significantly from that time, it seems that the market will be interested in whether it can follow the same trend as in the past.

Source: Fundstrat

Strengths of the Ethereum Economic Zone

Behind the breakthrough of Ethereum is the foundation of the ecosystem (economic zone) that has been built up so far. It has established its position as a top platform for applications such as ETH-based ERC20 tokens and dApps.

In the rapidly growing DeFi (decentralized finance) ecosystem, the latest version update (V3) will be held on the 5th at the largest ETH-based decentralized exchange “UniSwap” that was pioneered in advance. In addition to the introduction of the second layer “Optimistic Rollup” that can be a clue to solve the problem of soaring gas prices of ETH, new functions to improve the capital efficiency of liquidity providers (LP) will be implemented.

Relation:Uniswap V3, white paper commentary

The fact that most of the digital assets distributed in the rapidly expanding “NFT (Non-Fungible Token)” market is the ETH platform (ERC721) also contributes to improving the liquidity of the ecosystem, and is a digital financial and economic zone. It is no exaggeration to say that it is becoming a wall street.

Nick Mancini, a research analyst at Trade The Chain, a crypto asset data analysis company, pointed out:

“Gross Value Locked (GVL)” deposited in the DeFi market recorded exponential growth, with GVL reaching $ 117 billion. Among them, Ethereum-based assets account for about 70% ($ 80 billion).

The scalability problem that causes Ethereum’s transaction clogging and soaring gas prices is serious, and it is pushed by fast and inexpensive BSC (binance smart chain) -based decentralized exchanges and Solana (SOL) -based decentralized exchanges. It’s a little bit, but it can be seen that there is still room for growth in future updates.

According to the “Electric Capital” Developer Report published in December 2008, active developers have observed + 215% growth over the last three years.

With over 2,000 developers distributed around the world, it stands out from other promising projects.

The speculation of a major update

Behind the speculation is the ongoing major update related to the next-generation chain ETH2.0 and the accompanying improvement in supply and demand of actual ETH.

As of May 4, the number of validators on the Eth2 network exceeded 128,000, and Ethereum deposited in the deposit contract exceeded 4.2 million ETH. The APR, which is an annual interest rate guideline for staking, is 7.6%.

Eth2 launchpad

As shown on the Ethereum roadmap, the current Ethereum Mainnet (ETH1) will be merged with the ETH2 beacon chain by 2022 to proof from the current Proof of Work (PoW). -Completely switch to of stake (PoS).

This will also allow the withdrawal of Ethereum locked up by the staking of the Beacon chain, which will greatly contribute to improving the liquidity of the entire ecosystem.

Relation:What is virtual currency staking? | Mechanism of “reward” that even beginners can understand

Scheduled for 2021, “sharding” is the process of horizontally dividing the database to distribute the load.

Sharding, a multi-phase upgrade for Ethereum scalability and capacity, keeps hardware requirements low by distributing network load across 64 new chains and eases node execution by reducing congestion. To.

The planned phases in progress are as follows.

Phase 0:2020 (Implementation of “Beacon Chain” to manage Bali data)

Phase 1:2021 (implementation of “shard chain” used by users)

Phase 1.5:2021 (Shard chain mainnet operation, PoS transition)

Phase 2:2021 ~ (Full operation of shard chain)

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