Over the past two months, “treasury companies” have acquired over 3.4 million ETH. At current market prices, that’s $14.6 billion.
This rotation of funds is evident across markets. BTC’s dominance has fallen from 65% to 57%. ETH is up 81% (and 171% from its April low).
But that’s all in the past. Now we need to move on.
This week, we share an on-chain data update as we anticipate ETH’s next move.
Data: DeFi Report
As noted in the introduction, liquidity has been flowing into ETH through “treasury-like” companies. It’s also flowing in through ETFs… ETFs have also seen inflows… ETH has seen over $9.4 billion in net inflows since July 1st – a staggering figure in such a short period of time. These flows have put the combined ETH ETFs in the top 10 of all ETFs in the market – indicating a level of institutional demand previously seen only in the top tier of equity and bond ETFs.
In total, ETH ETFs have seen nearly $14 billion in net inflows and hold $29 billion in assets under management (AUM). Together, they hold 5.4% of the issued ETH supply.
During the same period, BTC saw net inflows of $5.4 billion.
Data: DeFi Report, Glassnode
Investors are turning to ETH. We believe this trend will continue.
But it won't be a straight line. Options Open Interest Data: Glassnode Further evidence of where investor interest and risk appetite are turning is that ETH options open interest now exceeds $15 billion, just below all-time highs. This is up 158% in the past two months alone. We believe a large portion of this is institutions hedging their ETF exposure.
For reference, BTC open interest currently stands at $44 billion, down from its all-time high of $54 billion reached in mid-August.
Data:validatorqueue
There are currently 927,000 ETH (worth $4 billion) waiting to be exited the staking queue.
This is not surprising given that ETH has risen 81% in the past few months and 171% from its April low. Meanwhile, 787,000 ETH (worth $3.4 billion) is currently entering the validator queue (likely due to the ETH Treasury staking their ETH for yield). How much of this exiting ETH might be sold? It's hard to say. A large amount of staked ETH is held on cryptocurrency exchanges such as Coinbase, Binance, and Kraken. Some of this flow may be due to trading during the bull market. Of course, some of it is likely sold.
As this reshuffle occurs, we may see some volatility in the price of ETH (and some FUD (fear, uncertainty, and doubt) on crypto Twitter). DeFi: Active Loans
Data: DeFi Report, Token Terminal
With active loans approaching $40 billion, Ethereum DeFi is vibrant and developing well.
The vast majority (71%) is on Aave.
Aave would rank 38th among US banks by total assets under management/total value held in smart contracts (TVL).
Data: DeFi Report
Average daily DEX trading volume increased by 266% from its April low, with L1 blockchains driving approximately 67% of the trading volume.
Data: DeFi Report
As DeFi activity increases, L1's average transaction fee has surged for the first time since the fourth quarter of last year.
The reflexive flywheel is in motion: price —> on-chain activity —> improving fundamentals (demand for block space and higher transaction fees) —> price —> on-chain activity.
Data: Glassnode
In terms of long term holder net unrealized profit/loss (NUPL), ETH has not yet reached the extreme levels we have seen in past cycles (shown in blue).
Data: Glassnode
The realized price represents the average cost basis of ETH's circulating supply. It is currently $2,300.
When market value deviates significantly from realized value, it indicates that the market is overheating.
The current reading is 1.87 (MVRV ratio). This indicates that the average ETH holder is holding 87% of unrealized gains.
This MVRV ratio was as high as 2.2 in the first quarter of last year and has reached 3.8 over the 21-year period.
*Note that this data only captures on-chain ETH (excluding ETH held in ETFs and ETH held on exchanges).
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