Data analysis: Four reasons why Ethereum finally hit a new high, but the positives are not yet exhausted

As soon as 2021 began, ETH showed an amazing upward trend. On January 1, ETH opened at 736.42u. At 8:00 pm Beijing time on the 19th, it reached a record high of 1438u, with a year-to-date increase of more than 90%. During the same period, BTC increased by 28%. (For historical highs, there are differences on different platforms. Coingecko shows that the highest historical high is 1448u, and Huobi shows that the highest historical high is 1422u)

As BTC breaks through its previous high and starts a bull market, ETH, which is second only to BTC, will naturally not be left behind by the market. Breaking through the 2018 high is actually something that can be expected, so the community did not show any special enthusiasm. Many investors even believe that ETH will start to accelerate its surge after breaking through its previous high.

At this important historical node, ETH's related on-chain data is also undergoing subtle changes. These changes can help us understand and judge the current situation facing ETH, and provide a basis for future research on its trend. Let's take a look at the changes in ETH's related indicators, data, and dynamics.

Reason 1: Large investors hoard

Crypto analysis company Santiment stated on its official Twitter account: In the past two weeks, the number of whale addresses holding at least 10,000 ETH has increased from 1,171 to 1,220 now, an increase of 4.2%.

According to glassnode data, over the past period of time, the total number of ETH addresses has continued to increase, the number of addresses with more than 10k ETH has increased, while the number of addresses with less than 10k ETH has decreased accordingly, and the number of addresses holding 1-100 ETH even plummeted on December 19.

It is not difficult to see that whales are quietly hoarding ETH, while retail investors are gradually being washed out. Retail investors are mostly out because of speculation, while the hoarding of large investors indicates that more whales are optimistic about the future development of ETH.

Reason 2: ETH2.0 staking leads to liquidity crunch

CryptoQuant CEO Ki Young Ju said that it seems that like the BTC market, sell-side liquidity tightening has begun to hit ETH.

According to CryptoQuant data, the amount of ETH held by exchanges has dropped significantly in the past few days, with 8.17 million ETH currently remaining on exchanges. From May 2020, the number of ETH held by exchanges has dropped from a peak of 14.11 million to 8.17 million today, a drop of 42%.

The decline in exchange reserves indicates that ETH is flowing out of the exchange. The outflowing ETH may be stored in a wallet or may be staked in the ETH 2.0 deposit contract.

The decline in the amount of ETH held by exchanges is in contrast to the increase in the ETH 2.0 collateral rate, which is currently 2.22%, meaning that 2.22% of the ETH supply is pledged in the ETH 2.0 deposit contract. The decline in exchange reserves and the increase in the collateral rate will tighten ETH liquidity, and the lack of liquidity will become the driving force for the long-term rise in ETH prices.

The number of active validators represents the number of validators who have pledged 32 ETH on ETH 2.0 and successfully activated as validator nodes. This indicator can be used to track the progress of ETH 2.0 and reflect the support of large investors for the ETH 2.0 project.

According to beaconcha.in data, the current number of validators is 63,601, with a maximum of 900 new validators joining every day. In the past month, the number of active validators has been steadily increasing, indicating that large investors are firmly optimistic about the future of ETH 2.0 and are willing to stake their ETH.

According to the current progress, it is expected to enter the next stage in August-September 2021. With the advancement of ETH 2.0 and the increase in the number of ETH staked, the ETH circulating in the market will further decrease, which also verifies the view that ETH is facing liquidity tightening.

Reason 3: Investors’ enthusiasm for ETH trading

According to glassnode data, ETH's recent trading volume has approached the peak level of the currency price in 2018. Unlike the sharp increase and decrease in trading volume in 2018, the overall ETH trading volume in this round of market has remained at a high level, which shows that investors' enthusiasm for ETH investment is not impulsive, and it seems to be accumulating strength. It is believed that ETH breaking through the previous high will not be the end of this round of market.

Reason 4: Institutional support

Grayscale Cryptocurrency Trust announced at the end of December that it would suspend new investments. Some investors believe that Grayscale's slowdown in market entry will increase the possibility of price corrections for related currency pairs. According to CryptoQuant data, Grayscale has not bought ETH since December 8, and currently holds 2,934,107 ETH.

During the period when Grayscale stopped buying, the price of ETH did not slow down. On the contrary, the rise was much stronger than the decline. This is partly because in addition to Grayscale, there are many institutions in the market that are paying attention to investment opportunities in mainstream cryptocurrencies, such as BTC and ETH.

According to relevant news, the Chicago Mercantile Exchange (CME) will launch ETH futures on February 8, 2021, and is currently in the final review stage. In the past year, BTC futures trading volume on the CME exchange has continued to create history, and at the same time, the price of Bitcoin has also broken new highs step by step.

If ETH futures are successfully launched, ETH will follow BTC's footsteps and be listed on CME. New investors will bring in new funds, and ETH's trading volume will continue to increase. The entry of traditional investors will push the price of ETH to new heights.

As more retail investors exit the market and more large investors exit, ETH faces liquidity tightening, and the high trading volume is expected to fluctuate. The continued attention of institutions and the upcoming major positive factors are all important factors that help ETH break through its previous high. (Author: K Editor: Wu said blockchain pictures from coincodex)