Ethereum Shows Signs of Growth Despite FUD

Hodlers accumulate and network volumes grow despite regulatory resistance

Lucas Outumuro
IntoTheBlock
4 min readMar 22, 2024

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This week we scrutinize some of the recent FUD against Ethereum. We evaluate ETH’s relative performance in terms of price, its fundamental metrics from a network perspectives and the bullish outlook shared by ETH’s long-term investors.

Network Fees — Sum of total fees spent to use a particular blockchain. This tracks the willingness to spend and demand to use Bitcoin or Ether

  • Bitcoin fees decreased by 15% this week as network activity and ordinals speculation dropped
  • Fees on Ethereum declined by 41%, with meme coin speculation slowing down significantly

Exchanges Netflows — The net amount of inflows minus outflows of a specific crypto-asset going in/out of centralized exchanges

  • Bitcoin saw $380M in net outflows from exchanges, slowing down from last week’s $700M+
  • ETH recorded its largest weekly net inflows into CEXs ($720M) since September 2022, as regulatory FUD spread

Ethereum Shows Signs of Growth Despite FUD

Ethereum has been subject to criticism by many over the past few months. Within crypto, people point to ETH’s price underperforming and traction on Solana as a sign of Ethereum losing its mojo. Beyond crypto, regulators are now reportedly cracking down on the Ethereum Foundation and going after ETH as a security.

As there is a lot of speculation and FUD floating surrounding Ethereum, it’s worth discussing the facts and the data to better understand the situation.

Source: ITB’s capital markets insights

ETH Underperformance is Real — ETH has lagged behind Bitcoin recently, and on a risk-adjusted basis, even behind the S&P 500

  • The ratio of ETH/BTC is holding just above 0.05, near its lowest point since June 2022
  • Taking into consideration its greater volatility, ETH has underperformed both Bitcoin and the S&P 500 on a traditional risk-adjusted basis as can be seen from lower values in Sharpe and Sortino ratios above

Price-wise, there is an argument to be made against ETH relatively lagging behind so far this cycle. However, in terms of on-chain data, Ethereum continues to grow.

Source: ITB’s Ethereum network metrics

ETH Volumes Reach High Level — The amount of ETH transferred on Mainnet reached its highest since May 2022 this week

  • ETH’s daily average volume has been on an up-trend similar to the early bull market in 2020/2021
  • In contrast to the last bull market, activity on layer 2s (L2s) has dominated, with the number of transactions on Base, Optimism and Arbitrum being more than double in aggregate than on Mainnet
  • The amount of ETH on L2s recently surpassed 10 million for the first time, doubling since last year per L2Beat
  • Following a 90%+ fee reduction in fees post-Dencun, network activity on L2s is likely to continue growing

These are all signs that Ethereum fundamentals are improving, and it appears long-term ETH investors are aware.

Source: ITB’s ETH ownership concentration indicators

ETH Hodlers Unfazed by FUD — The amount of ETH in wallets that have been holding for over 1 year continues hitting new highs despite negative news

  • In spite of reports of the SEC pushing to reevaluate Ether’s status as a security and decreasing odds of an ETF being approved, ETH’s long-term investors are not selling
  • Based on previous market cycles, it appears that hodlers still believe ETH has room to continue appreciating
  • As we’ve covered before, Hodlers tend to sell into the later stages of a bull market and begin re-accumulating after 50% drops
  • So far the lack of selling in ETH hodlers seems to show they have strong conviction regardless of its recent underperformance and uncertain regulatory stance

Overall, after undergoing a major upgrade, ETH hodlers continue to be bullish. Despite recent headwinds, the data supports continued growth for Ethereum both on layer 1 and layer 2s.

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Lucas Outumuro
IntoTheBlock

Head of Research @IntoTheBlock. Actively researching token economics, DeFi and technology broadly. Twitter: https://twitter.com/LucasOutumuro