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IntoTheBlock

Analyzing Ethereum’s Current User Activity

This article analyzes Ethereum’s current environment and user interest trends.

Investors and user’s interest in the crypto ecosystem goes both ways. During upward market cycles clear growth trends are noticed. While in market downturns the opposite happens, investors and users lose interest in the ecosystem. In both scenarios, users’ interest change takes the ecosystem into different states. This article analyzes Ethereum’s current environment and user interest trends.

In order to use blackchain’s blockspace users must pay a “Transaction Fee”. This one varies depending on the current demand for blockspace. The more demand the higher the fee goes. As pictured in the indicator below, at IntoTheBlock we measure the daily mean transaction cost. This helps us assess the current blockchain demand.

Source: IntoTheBlock

Ethereum is known for being among the blockchains with highest activity. This brings high transaction fees under the blockchain current state. As depicted on the indicator above it can be seen how the daily “Average Transaction Fee” currently stands at the year to date lowest level. This trend, points out a decrease in demand for blockspace in Ethereum’s blockchain.

Ethereum’s current decrease in transaction cost gives native users the benefit of low transaction costs. At certain instances throughout 2022 users were obligated to pay exorbitant transaction costs. As depicted in the indicator above, on April 30th when Yuga Labs released its metaverse land for sale, the Otherside, brought daily average transaction costs to $200 USD. In addition, this new transaction cost environment may bring back sidechain adopters, which left as a consequence of high transaction costs during the bull market.

Another way to measure blockchain activity is through the “Active Addresses Ratio”. This one takes the percentage of the total “Addresses With a Balance” that had a transaction. It essentially divides “Active Addresses” by “Addresses with a Balance”.

Source: IntoTheBlock

The indicator above depicts the daily percentage of addresses with a balance that has sent a transaction. As depicted above the percentage of addresses currently stands in a year to date low at 0.62%. This represents a 28% decrease in activity from the beginning of the year, which was at 0.87% of daily active addresses. This above indicator further illustrates the user’s interest swing throughout a change in market conditions.

Despite the decrease in demand for blockspace and in the daily active addresses, transaction volume has managed to withstand the same level since the beginning of the year. For the indicator below IntoTheBlock, gathers on-chain volume transferred and records its USD value given daily price of the assets.

Source: IntoTheBlock

Transactions Volume’s above indicator can indicate both trading and non-speculative activity. Volatility drives high transaction volume in the market. This trend is clearly visible for May 13th when the Terra ecosystem collapsed. Furthermore, it is also visible in the recent market downfall at the beginning of June 2022. This indicator can be helpful to spot potential reversals and break-outs in the market.

During past crypto bear markets, on-chain transactions volume has experienced extensive decreases in activity. Even though the market’s downfall was recently and there is still volatility in the market. This sustained transaction volume could point to a different path; as is the case with DeFi, which was developed during this past bull market and has not been in previous bear markets. The DeFi economy currently has successful and functional protocols which attract massive daily liquidity that could account for the sustained levels of transaction volume.

Overall, the economy remains at an uncertain stage. Regardless of the outcome of ETH price over the next few months, these indicators show clear signs of user’s decrease of engagement with the Ethereum ecosystem. Despite macro uncertainties continuing to hit crypto markets, the Ethereum community has upcoming important milestones. Primarily the transition to proof of stake through the merge. Future events like this continue to improve the industry’s outlook and attract new users long-term.

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