Ethereum is scheduled to undergo a merge that would reshape the future of the digital asset from a project powered by miners through a process known as Proof of Work (PoW) to Proof of Stake (PoS) which is widely presumed to consume lower energy and subsequently, lower gas fees.
With $198.971 billion market capitalisation and 400 decentralised applications, the world’s largest protocol could be exposed to certain level of risks not anticipated in its planning stage given its current size. Therefore, investors and traders of Ethereum are generally expected to be cutting down on their exposure or holding by now ahead of September 15 planned merge.
However, on Tuesday the price of the token started appreciating. Suggesting that many retail traders looking to take advantage of the Ethereum merge have started increasing their holdings, a situation that could hurt their pockets and entire portfolio if the merge goes wrong.
Year-to-date, Ethereum has lost 54.77% of its value. However, in the last 24 hours, the coin gained $56.33 to $1,608.83 a coin.
Investors transacted Ethereum worth $2.62 billion in 1.09 million deals in the last 24 hours while the average fee paid per transaction was $1.94.
Since its inception, it has risen to an all-time high of $4,865.57 before plunging to as low as $880.93 a coin when the Luna-triggered bearish trend commenced. The total Ethereum supplied to date is 119.64 million.
Commenting on the Ethereum merge, the CEO of Bitcoin White Rock, Andy Long, said the Ethereum merge will force existing Ethereum PoW miners to seek other coins still operating with PoW to protect their investments.
“Hash rate will flow to alternative GPU PoW coins, and many miners will simply give up and try to sell off their farms of cards,” he said.
“Some miners will try to sell their High-Performance Computing (HPC) or GPU cloud services and will likely fail since there’s too much capacity chasing a limited amount of demand,” he added.
Dormant Ether Holder Awakens, Transfers Nearly $90 Million to Kraken Exchange
A significant Ethereum (ETH) holder, dormant for five years, recently transferred almost $90 million worth of the token to the crypto exchange Kraken.
The on-chain analytics tool Lookonchain reported this development in the early hours of Tuesday, shedding light on the activities of this long-inactive “whale.”
A whale refers to an entity holding a substantial amount of any cryptocurrency.
Blockchain data reveals that during the Asian morning hours, the whale deposited 39,260 ether into Kraken. In 2017, this same address received 47,260 ether estimated at over $11 million at the time.
An early $ETH whale appears to be selling ETH again after being dormant for 5 years.
The whale received 47,260 $ETH($11.34M) at ~$240 from June to August 2017.
If sold the whale would make a profit of ~$78M. pic.twitter.com/v0PI4LNTKO
— Lookonchain (@lookonchain) December 5, 2023
Upon analyzing the address, it was discovered that previous transactions were not linked to the cold storage of any exchange.
However, there is a possibility of a connection to trading firm Cumberland as indicated by labeling on the data tool Arkham.
The significance of such a large holder moving assets to an exchange lies in the potential repercussions for the market.
When whales transfer funds to exchanges, it often raises speculation about selling pressure as the holder might either sell the tokens for stablecoins or convert them into other cryptocurrencies.
This event adds an element of intrigue to the cryptocurrency market as observers keenly watch for any subsequent market movements.
RxR Analysis Reveals: Ether’s True Worth 27% Higher than Market Price
RxR, a research-driven partnership between Republic Crypto and Re7 Capital, has revealed that Ether (ETH), the native token of the Ethereum blockchain, is currently trading at a 27% discount to its actual fair value.
This revelation comes as a result of RxR’s innovative approach to evaluating the worth of cryptocurrencies. Instead of relying solely on traditional metrics, RxR’s methodology incorporates a blended version of the Metcalfe law that takes into account both the active user base on the continuously expanding Ethereum scaling networks and the users on the Ethereum mainnet.
Ether, as a fundamental component of the Ethereum ecosystem, facilitates a wide range of activities, from simple transactions to participating in network security through staking, earning interest, and even storing non-fungible tokens. As such, the value of Ether has long been intertwined with Ethereum’s network usage.
Lewis Harland, an analyst at RxR, explained the significance of this approach, stating, “Ethereum’s network valuation exhibits a closer alignment with the updated Metcalfe law index when the active user base of Ethereum’s scaling networks is included in the model, in contrast to when it is omitted.”
Harland continued, “The updated model, which factors in these networks, places ETH’s valuation at $275 billion, indicating that the current market capitalization is trading at a substantial 27% discount.”
Ether’s market capitalization consistently tracks the blended Metcalfe law model more accurately than the traditional model, which fails to consider the growing activity on layer 2 networks or offchain solutions built atop the Ethereum mainnet.
In essence, this analysis challenges the perception that Ether might be overvalued, as suggested by the traditional Metcalfe law Model.
The emergence of Layer 2 technology has undoubtedly become one of the most dynamic and exciting developments in the crypto market. Key protocols, such as Coinbase’s BASE, Arbitrum, and Optimism, have found their unique niches within this landscape.
According to data from L2Beat, the total value locked in layer 2 protocols has surged more than threefold in just two years, reaching an impressive milestone of over $9 billion.
Nearly 90% of Ethereum Supply Now Held Off Crypto Exchanges
Data shows that nearly 90 percent of Ethereum supply has left cryptocurrency exchanges for cold wallets or staking polls. This is the largest since 2015.
It is worth noting that consumers have started moving their Ethereum holdings en masse to self-custody addresses since September last year. A process that was intensified in November during the FTX meltdown, which undermined the trust in centralised platforms.
A similar scenario also played out with Binance on Tuesday when more than 3000 BTC was withdrawn within 24 hours from the platform following a threat from the U.S. Commodity Futures Trading Commission (CFTC) to sue the exchange for allegedly violating trading regulations.
Investors often tend to move their digital assets from centralised exchanges to cold wallets at the slightest controversy.
According to on-chain analytics provider Santiment, the total supply of ETH held on exchanges is currently at its lowest level since July 2015, with only 10.31% of existing ETH available. The remaining almost 90% of Ethereum is being held by wallets controlled by users.
A low proportion of ETH on exchanges means that if significant buying pressure were to be seen on the market, the cryptocurrency’s price would likely go up, as there is little supply readily available to satisfy demand.
Investors King understands that other factors responsible for this trend include the transition of Ethereum network from a Proof-of-Work (PoW) consensus algorithm into a Proof-of-Stake (PoS) consensus algorithm.
In addition, Ethereum staking has been seen as a source of revenue for both cryptocurrency holders and exchanges. These platforms offer users a staking service allowing them to maintain liquidity by locking their ETH on-chain to earn rewards.
Another tenable reason is that investors are starting to see Ethereum as a potential long-term investment vehicle, much like Bitcoin. This is evident in the growing number of holders, who are holding onto their Ethereum for the long term, as opposed to trading it on cryptocurrency exchanges.
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