Ether is down 30% from its 2020 high of $ 482 on September 1 to $ 340 in five days. The drop in prices of Ether (ETH) and Bitcoin (BTC) is mainly due to the rise in the dollar, which stopped the bull run for Bitcoin. Ether is still hovering around $ 340 and not recovering from its August price ranges.
As the price of Ether has dropped significantly since the beginning of the month, some fundamental factors of the Ether network itself have changed. This includes the movements and positions of key figures in the ecosystem such as traders, whales, miners and DApp users, as well as activities in the network, particularly with regard to DeFi and stablecoins. In addition, the ECR-20 tokens have already surpassed Ethereum’s market capitalization.
Since DeFi tokens form the backbone of the Ethereum network, they will have a major impact on the upcoming price movements of Ethereum itself. Understanding the movements of ether will give traders a better idea of where the money is going, and understanding that activity within the network will give an idea of how popular the real network is compared to trading.
Hodler and Dealer
With Ether losing almost 30% of its value within five days at the beginning of the month, the dynamics of who owns, uses and trades the cryptocurrency have changed. According to data from CryptoCompare, a market data resource, the number of active addresses has decreased. James Li, a CryptoCompare research analyst, told Cointelegraph:
“The active direction indicator is related to the number of users, and the decline in active addresses could indicate that some users have been put off by falling prices and even the DeFi ecosystem is gradually cooling down, which may be because users are leaving their possessions after the Change to keep DeFi tokens and do not move. “
In terms of traders, CryptoQuant, a chain analysis company, saw a huge surge after the market crash. According to Ki Young Ju, the CEO of CryptoQuant, The ether entries on the stock exchanges reached a six-month high on September 1st and declined shortly thereafter. More recently, inflows have risen again since September 14, which means higher selling pressure for ethers.
While a drop in prices would suggest the number of whales has declined, in reality the opposite has occurred. There are now more “rich” players on the network, which may mean that more people have accumulated Ether and / or that new players have entered the market.
The Ethereum network and miners
Given the fall in prices on September 1st, a decline in miners’ incomes was expected. Even so, the network’s hash rate has continued to rise, meaning miners are still finding it profitable to mine ether. Over the past three weeks, the hash rate has increased by 15.5% from 218 to 252 terahashes per second, showing that mining ether is still profitable.
According to CryptoCompare, the latest Nvidia GeForce RTX 2070 super graphics card and average electricity costs of $ 0.08 per kilowatt-hour can make Ether Miner a monthly profit of 37.96 USD per card at the current ETH price. It should be noted that professional establishments can have average electricity bills of $ 0.05 or less, especially in countries with subsidized electricity. Mike Manson, co-founder of Blockware, a US-based mining and hosting company, told Cointelegraph:
“We believe that the Ethereum miners are not badly affected by the drop in Ethereum prices. The transaction fees, hash rate, gas consumption and rewards for mining have steadily increased. There is currently a high demand for Ethereum mining machines with a All time highs in GPU and ASIC devices. It appears the market is pricing in a longer transition to the proof-of-stake model. “
The above figure also does not take into account the gain on interest rates, which increased in the first three days of the week, likely due to a surge in transactions caused by the volatility of ether prices. Since then, the network’s total daily rates have dropped from 37,967 to 10,157 ethers per day.
DeFi and stablecoins
While miners’ profits have declined due to the recent drop in Ether prices and the surge in hash rate, other sectors of the Ether Blockchain have kept up despite falling prices, including exchanges. decentralized companies that previously hit an all-time high of more than $ 11 billion a month in August.
At the time of this writing, DEX trading volume has exceeded $ 22.92 billion in the last 30 days. Uniswap, which previously outperformed Coinbase and reached $ 1 billion in volume in a single day, remains at the top with a share of 59% of DEX’s total trading volume. The transaction volume itself has continued to grow despite the decline, and Ether’s daily transactions hit a new all-time high last week.
This not only has allowed the volume of the decentralized exchanges to continue, but the overall commitment to revenue-generating DeFi protocols is roughly the same as it was before the market crash earlier this month. Over the past 20 days, DeFi’s total value has increased from $ 8.40 billion to $ 9.76 billion at the time of writing.
DeFi token prices have also partially rebounded, and the drop in Ether prices coupled with the growth of the DeFi sector has resulted in the collective capitalization of the ERC-20 token market surpassing that of Ether. Ilya Abugov, Open Data Leader at DappRadar – an analytical resource for decentralized applications – told Cointelegraph:
“Short-term price movements are often speculative and don’t have much of an impact on the ecosystem. Some have mentioned a decline and a recovery in total blocked value, but if you look at that value on a 30-day plane, you will find that it is indeed one there was growth. Ether prices are still significantly higher than in early summer, so this decline should not affect development. “
The decline also appears to have had a minor impact on stablecoins, which continued to grow in September. According to CryptoQuant, stablecoin entries have also increased on exchanges, most of which go to Binance. On September 12th, $ 1 billion tether (USDT) was sent to Binance, which can be seen as a bullish signal for ether and other tokens. However, this also shows that stablecoins still make up a large part of the Ethereum ecosystem.
The future of Ethereum
While the fundamentals of Ethereum show that despite the crash, activities continued on all fronts, both with regular use and with DeFi degrading and growing. There are other obstacles that could soon prove problematic for Ethereum, despite advances in Ethereum 2.0, an improvement that experts say is unlikely to accelerate corporate adoption.
Scalability is the main problem in this context, as congestion and high charges are the order of the day in the network. Experts believe that scalability solutions such as Layer 2 integrations are required for decentralized exchange and DeFi itself to become mainstream.
In addition, DeFi could soon face a regulatory hurdle, and in the case of stablecoins, high-level competitors such as top-notch institutions and corporations could also enter the room with their own offerings. However, it is likely that the price of Ether will rise at the same time as DeFi continues to grow. Abugov told Cointelegraph that it is not investment advice:
“With Binance now showing a lot of interest in DeFi, Polkadot showing a lot of activity and a number of other elements as well, the DeFi sector seems geared towards further growth. Pricing is more likely to respond to short-term sentiment than actual growth and activity, so that industry growth may not go hand in hand with ETH prices. Much can depend on the mood around Ethereum 2.0. “