ETH has skyrocketed, driven by a mix of longer-term technological vision & fundamental use, and short-term sentiment
There is no doubt that Crypto market is hot right now and has been this way for the past many months. Ethereum has been skyrocketing on strong DeFi demand, upcoming technological improvements & long-term potential. However, price volatility last week clearly demonstrates there is not enough liquidity for people to cash out at current prices in DeFi. To understand why Ethereum prices are propelling higher, let’s look how the entire Ethereum supply is held — as shown in the charts above.
According to Chainalysis Market Intel, the chart on the left shows that 53.3 million Ethereum, 46% of the total supply, is currently held in self-hosted wallets that hold more than 10k Ethereum each. These entities have increased their holdings by 7 million Ethereum since November 2020, making this group one of the main recent accumulators. The other large recent gainer is DeFi. 13 million Ethereum is currently held in DeFi, up from 3 million Ethereum in May 2020. This has largely come at the expense of Ethereum held on exchanges, which has declined and now matches the amount of Ethereum held in DeFi.
The second chart (on the right) shows the holdings of Ethereum whales by type. Ethereum investor whales holding from 2017 own the most Ethereum, 45.7 million Ethereum, or 77% of all the Ethereum held by whales and 39% of the entire supply. They are not just the largest group of whales but they have also increased their Ethereum holdings the most since November 2020, adding 5.5 million Ethereum to their wealth.
The final chart above shows the Ethereum received by post-2017 investor whales each week from November 2020 by the type of service the Ethereum was last sent from. At least 45% of these inflows have been from DeFi and decentralized exchanges, showing that investor whales are deep in these new markets. This is confirmed when looking at the destination of outflows from investor whales, with 71% of inflows to DeFi and decentralized exchanges.
All of this data suggests that Ethereum buying pressure is coming from DeFi, with 10 million Ethereum entering DeFi since May 2020 — with new investor whales, acquiring 6.3 million Ethereum since November 2020. DeFi is also the source and destination of much of the Ethereum that these whales receive and send. While the ETH price is certainly being driven by big, new players, short-term FOMO (Fear Of Missing Out) is also taking hold — driving short-term gains.
Originally Published on Medium