Every week, IntoTheBlock brings you on-chain analysis of top news stories in the crypto space. Leveraging blockchain’s public nature, IntoTheBlock’s machine learning algorithms extract key data that provide a deeper dive into the major developments in the industry.
This week, we cover Bitcoin’s reach towards a new all-time high, as well as take a look at the supply locked in Ethereum after the launch of ETH 2.0.
Bitcoin ATH Fueled by Institutional Activity
Bitcoin continues to outperform traditional markets. On Dec. 1, it reached a new all-time high of over $19,800 based on data from most exchanges. Even though many do not consider this an all-time high until it surpasses the $20,000 barrier, Bitcoin has managed to sustain above $18,000 for a longer time than it did in December 2017.
The Bitcoin rally in 2020 has been fueled by institutional players stepping in, along with the narrative of digital gold. This has been evidenced by support from large traditional finance players such as Blackrock, JPMorgan and Fidelity, fintech companies such as Square and PayPal, and renown macro investors such as Paul Tudor Jones and Stanley Druckenmiller. More recently, even S&P Dow Jones Indices announced they will be launching cryptocurrency indices in 2021, which are expected to keep fueling market participation from financial institutions.
Through on-chain indicators, we can confirm that institutional interest has indeed been growing throughout 2020. Large Transactions, which IntoTheBlock categorizes as those of over $100,000, just hit a new yearly high on Dec. 1. Given the size of these transactions, the large transaction indicators provide a proxy to the activity of institutional players and whales.
The number of transactions of over $100,000 recorded on the Bitcoin blockchain on a daily basis has more than doubled from a year earlier. Furthermore, the total volume transferred in these has experienced even larger growth.
On Dec. 2, 2019, Bitcoin had an aggregate large transaction volume of $4.9 billion. One year later, large transaction volume has grown to over $29 billion, representing an increase of nearly six times the volume. Along with the high level of activity from institutional participation, Bitcoin has appreciated remarkably.
The new Bitcoin $20K section in CoinMarketCap tracks the performance of Bitcoin versus traditional finance indices and gold. As can be seen from the graph below, Bitcoin’s 169% return has dwarfed the performance of traditional instruments in 2020.
While it is still uncertain when Bitcoin will manage to surpass the coveted $20k mark, it is evident that this time support for the cryptocurrency is stemming from large players and not only retail speculators. Ultimately, the next few months are likely to play a key role defining the mid- to long-term path of Bitcoin amidst the macroeconomic environment.
Ethereum 2.0 Launches
On Dec. 1, Ethereum reached a major milestone as it successfully launched Phase 0 of the multi-year upgrade Serenity, dubbed as ETH 2.0. Phase 0 consists of the launch of the Beacon chain, a proof of stake chain processing transactions and reaching consensus in parallel to the legacy proof of work blockchain. Through the proof-of-stake consensus, users locking their ETH supply on the staking contract are able to receive passive earnings on top of their deposits.All of these trends have helped push Bitcoin forward in its latest move. While all of these milestones are certainly appreciated by holders, all eyes are still set on the coveted $20,000 mark.
The minimum threshold for ETH 2.0 to launch was reached within hours of its Nov. 24 deadline. The total amount of Ether deposited more than doubled within the last two days for the target.
At the time of writing, the Beacon chain has reached a total of 2,896 unique depositors, supplying over 980,000 ether. This is now nearly twice the minimum threshold that had been set for the launch of phase 0 of ETH 2.0.
Given the magnitude of the inflows of ether into the deposit address, liquidity had to decrease elsewhere. In this case, DeFi protocols have seen a significant reduction in the total amount of ETH locked in their smart contracts.
Throughout the last month, the total amount of Ether supply locked in DeFi protocols has decreased by approximately 2 million. This trend accelerated after the ending of UNI liquidity mining rewards in Uniswap. While a large portion of the Ether withdrawn from this indicator ended up in the deposit contract, it is likely that some also ended up in smaller, newer DeFi protocols not accounted for in the metric. This seems to be the most likely scenario as centralized exchange inflows for ether remained stable throughout the month.
Along with the positivity from reaching this milestone, Ethereum is also showcasing strong growth in on-chain metrics. For instance, the total number of daily active addresses (DAAs) on a given day reached a new three-year high on Nov. 29.
The previous high for DAAs on Ethereum was recorded in January 2018, when Ether’s price was over $1,000. This points to ether currently being priced at a discount relative to daily activity on its blockchain. While this is certainly not the only factor to consider when attempting to value Ethereum, the growth in DAAs does point to its increasing utility. Similarly, the number of ether holders has grown consistently, approaching the 50 million landmark.
Overall, the launch of the Beacon Chain marks the beginning of a new era for Ethereum. As its active developer community works on implementing scalability solutions, on-chain indicators point to growing activity and optimism for the second largest crypto-asset.
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