Short-term Crypto Interest Fades
But Hodlers Continue to Accumulate
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This week has been a relatively quiet one in crypto, leading to some of the lowest on-chain activity in years. We take a step back and assess the contrasting picture between the demand to accumulate crypto vs that to use blockchains.
Fees — Sum of total fees spent to use a particular blockchain. This tracks the willingness to spend and demand to use Bitcoin or Ether.
- Network fees for Bitcoin and Ethereum reached multi-year lows, a topic which we will discuss further
Exchanges Netflows — The net amount of inflows minus outflows of a specific crypto-asset going in/out of centralized exchanges. Crypto going into exchanges may signal selling pressure, while withdrawals potentially point to accumulation.
- Bitcoin recorded modest outflows from centralized exchanges, while Ether saw relatively larger amounts of nearly half a billion being withdrawn
On-Chain Demand Drops to Yearly Lows
Gone are the days of hundred-dollar gas fees on Ethereum. While it is now significantly more affordable to use Ethereum, user demand is lagging now that much of the speculation has left; a pattern that had occurred on previous bear markets.
2-Year Lows — Network fees paid to use Ethereum reached their lowest in two years
- ETH’s decreasing price is not the only reason for the decline, with fees also dropping in ETH terms
- As volumes in DeFi and NFTs have plummeted, people are less willing to pay to use Ethereum
- At these fee levels, Ether would be inflationary even following the merge’s 90% issuance reduction
The lack of new entrants is likely a key reason for this low demand regime.
Merge Excitement Not Appealing to New Users — While the transition to proof of stake is highly anticipated within the crypto community, it does not appear to be embraced by new users
- New addresses created on Ethereum reached their lowest levels since 2020 before DeFi summer
- While centralized exchanges may be seeing new users buy ETH, this is not reflected in new addresses as they typically combine multiple people’s holdings within a select number of addresses
- Therefore, even though there may be some buying from new entrants, the lack of new addresses on-chain shows demand to use the blockchain is declining
Low Search Interest — In spite of the upcoming milestone, relatively few people are searching for Ethereum
- This may indicate an echo chamber taking place, where crypto-natives are more closely anticipating the merge while people outside the industry still remain largely unaware
- In a way this could be perceived positively, as many will not find out about Ethereum’s 99% energy usage or 87% supply issuance until after the merge
- However, general interest remains low along with prices
Overall, it is normal for crypto to oscillate between periods of intense demand to ones of lackluster interest. While the decreasing demand may be a problem short-term, longer-term believers continue to double down.
Hodlers Continue to Accumulate
In contrast to blockchain activity, many crypto-assets continue to be on demand. Bitcoin and Ether have rallied along with multiple tokens and long-term oriented players continue to double down
- Hodlers’ balance reached a new high of 12.92 million BTC
- This follows bear market accumulation periods, with over 60% of all Bitcoin now owned by addresses that have been holding for over a year
- The consistent accumulation in bear markets reflects the strong commitment and long-term conviction many holders have in crypto
- Bitcoin believers have been accumulating to reach 1 BTC
- The number of addresses holding between 1–10 BTC continues to set new highs, approximating 750k
Ultimately, this highlights the diverging pictures between on-chain demand and accumulation of the largest two crypto-assets.
Upcoming Webinar
*Date updated to Wednesday August, 31st at 12pm (EST)*
In DeFi’s early days we saw an abundance of high yield opportunities, but a lack of risk management. As the sector matures it is primed to evolve into a a more resilient DeFi where yields are harder to come by and a greater emphasis is put on risk monitoring capabilities.
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