LD Capital: Recent ETH Price Performance and Direct Influencing Factor Analysis
Recently, Bitcoin has been showing strength, attempting to break through the resistance zone of 28000–28500 several times; ETH, on the other hand, has been relatively weak, testing the 1750 resistance level only once. This article briefly analyzes the recent price performance of ETH, as well as potential influencing factors.
I. Price Performance
ETH/BTC: In a declining state since the 2022 MERGE
Over the past year, ETH has been in a weak position relative to BTC. From the beginning of 2022 to the present, the ETH/BTC index was in a declining state from January to June 2022, falling from 0.081 to around 0.050. Subsequently, due to the positive impact of the merge, it rebounded, returning to approximately 0.08 in September 2022. After the merge was implemented, this index has been in an overall downward trend, currently at 0.058, and it is close to the weekly ema200.
However, looking at the long term, ETH/BTC is in a growth state. Extending the time scale, during the bear market in 2018, ETH/BTC reached a low of 0.01, while in the current bear market from 2022 onwards, ETH/BTC recently hit 0.05. This primarily stems from the development and expansion of the ETH ecosystem, which has accumulated a considerable amount of on-chain value compared to the previous bear market.
Technical Indicators
On the daily chart, ETH has been below the EMA200 since it fell on August 18, and MACD has just approached the zero axis. In comparison, BTC stood above the EMA200 on October 1, and MACD also broke through the zero axis, entering the above-zero area.
II. Influencing Factors
The strength and weakness of ETH are influenced by very complex factors. On a macro level, these include changes in the US Federal Reserve’s interest rate policy and changes in the SEC’s regulatory stance. On a micro level, these include the development of the ETH ecosystem, the rise of layer 2, token burn and supply, and the market capital participation enthusiasm, among others. This analysis only considers factors that have recently changed significantly.
Significant reduction in gas consumption; ETH resumes inflation
In August and September 2023, on-chain trading activity entered a quiet period. On one hand, there were no new hot projects on-chain, leading to reduced trading; on the other hand, several large potential airdrop projects experienced a large amount of hacking and project ‘rugging’, diminishing interaction enthusiasm.
On-chain gas for ETH has essentially been maintained below 10 gwei. The decrease in on-chain activity and reduction in gas costs have resulted in ETH supply exceeding consumption over the past 30 days, resuming inflation. The inflation rate is 0.275%, with an additional 27,000 ETH in the past 30 days.
However, overall, ETH still remains in a deflationary state after the merge. From the merge until now, the inflation rate stands at -0.217%, with a total reduction of 277,000 ETH.
Staking Slows Down, Queue for Awaiting Staking Tokens Decreases
Currently, Ethereum has a total of 844,000 active staking nodes, with approximately 27 million ETH staked, and the staking rate has reached 25.33%. Overall, the current number of new staking additions is significantly lower than in the second quarter of 2023.
At present, there are a total of 5,723 nodes waiting to participate in staking. Since Ethereum can add up to 2,700 new staking nodes per day, thus, without the addition of new tokens, it would only take 2 to 3 days to process them completely. This marks the period with the least number of nodes waiting to participate in staking since the Shanghai upgrade.
Continuous ETH Sales by the Founder Over the Past Two Months
Vitalik, the founder, has been consistently transferring ETH to exchanges through a particular address. On October 7th, he transferred another 1,000 ETH (approximately 1.64 million USD) to Bitstamp. Over the past two months, this address has deposited a total of 4,400 ETH (approximately 7.23 million USD) into Bitstamp.
In terms of quantity and amount, this is not enough to impact ETH’s price. However, emotionally, it can affect the confidence of the investors holding it.
Short-Term Selling Pressure Brought About by FTX Hackers Liquidating ETH
A major event affecting ETH in the last 7 days was the FTX hackers selling ETH and purchasing BTC, starting on October 1st.
In November 2022, shortly after FTX filed for bankruptcy, hundreds of millions of dollars began to flow out of the exchange balance into hacker addresses. On November 21st, 2022, the hacker distributed 185,000 ETH (308 million USD) into 13 addresses and then went dormant. After hibernating for 10 months, the hacker began transferring and selling the ETH from these addresses starting September 30th.
From September 30th to October 6th, 75,000 ETH (120 million USD) was transferred from 5 addresses. Of this, 71,000 were exchanged for BTC through THOR Chain, 2,700 ETH was exchanged for 165 tBTC and then bridged back to the Bitcoin network through the Threshold Network, and 1,500 ETH was transferred through the privacy network RAILGUN_Project. This also led to THOR Chain announcing maintenance mode on the afternoon of October 6th.
The hacker currently still holds 110,000 ETH (176 million USD) in 8 addresses on the Ethereum network. Of the original 13 addresses, 5 have been emptied.
Contract Data
The main focus is on position changes, and overall, ETH holdings are decreasing. In January 2023, when it rose to 1,600 USD, holdings were at their highest level of the year, approximately 2.37 million. In April, when it rose to nearly 2,000 USD, holdings were 1.22 million, marking the second highest point of the year. Before the decline on August 18th, holdings were 890,000. Current holdings are 730,000.
Compared to the high at the beginning of the year, holdings have fallen by 45%; compared to the second highest point of the year, they have fallen by 37%; compared to holdings before the decline on August 18th, they have fallen by 17%.
III. Conclusion
In the long term, compared to the previous bear market, ETH has generally been rising against BTC due to its ecosystem development, increasing from 0.01 to above 0.05. However, looking at the most recent year, ETH is in a weaker position compared to BTC, with its exchange rate in a declining state.
In terms of fundamentals, since the merge, ETH has been in a deflationary state, with an inflation rate of -0.217%. However, over the past two months, on-chain transactions have been quiet, gas income has significantly decreased, and ETH has entered an inflationary state, with an annualized inflation rate of 0.275% over the past 30 days.
In staking data, since the Shanghai upgrade, ETH staking has been continually rising, with the current staking rate at 25.33%. However, recent staking addition data has slowed down. The number of new staked quantities is significantly less than in Q2 this year; and also, the number of nodes queuing to participate in staking recently is less, marking the smallest time span since the Shanghai upgrade.
In terms of selling pressure, the founder continues to sell ETH; although the amount is not large, it adversely affects confidence in holding the token. Additionally, due to the FTX hacker selling ETH and buying BTC, there is considerable short-term selling pressure.
In contract data, ETH contract holdings are on a downward trend this year. Compared to the year’s initial high, ETH contract holdings have fallen by 45%; compared to the year’s second high, they have fallen by 37%; compared to holdings before the decline on August 18th, they have fallen by 17%.
Note: The data in this article is accurate as of October 7th, 2023.
LD Capital
As a global blockchain investment firm, we have built a portfolio of over 250 investments since 2016, spanning across various sectors, including infrastructure, DeFi, GameFi, AI, and the Ethereum ecosystem. We focus on investing in projects with disruptive innovations, actively taking on the role of primary investors, and providing comprehensive post-investment services to these projects. We employ a combination of direct investment from our own funds and a distributed fund model to cover all-stages of investment.
Trend Research
Trend Research division specializes in crypto hedge funds focusing on secondary areas within the crypto market. Our team members come from platforms and institutions like Binance and CITIC. We excel in macroeconomics, industry trends, and project data analysis. With funds dedicated to trend funds, index funds, hedge funds, and liquidity funds, we manage assets totaling over $400 million, including proprietary assets.
Cycle Ventures
We are a specialized early-stage investment firm in Web3, focusing on investment and service, with a strong emphasis on three major areas: Infra, AI, and Dapp. We have a team of nearly 20 senior engineers and dozens of crypto experts as advisors, deeply assisting projects in strategic design, technical development, and liquidity enhancement. We are deeply involved with asset management agency Cycle Digital and liquidity service provider Cycle Trading. Also, the team is actively involved with X Labs, a compliance service institution in Hong Kong, to help global projects establish a presence in Hong Kong and ensure compliance.
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