Source: The DeFi Report
By Michael Nadeau
Compiled and compiled by: BitpushNews
Over the past two months, various “treasury companies” have acquired more than 3.4 million ETH, which is worth $14.6 billion at current market prices.
Capital rotation is evident across markets. Bitcoin's dominance has fallen from 65% to 57%, while ETH has risen 81% (and 171% since its April low).
But all that is now in the rearview mirror. Now we need to look forward.
This article will share some on-chain data updates and look ahead to where ETH is headed next.
Let's get started.
ETH on-chain data
ETH vs. BTC
Data source: The DeFi Report
As mentioned in the introduction, liquidity has been flowing into ETH through “treasury” companies.
It’s also flowing in through ETFs…
ETF
Since July 1st, ETH has seen net inflows exceeding $9.4 billion – a truly astonishing figure in such a short period of time.
These inflows have put the ETH ETF in the top ten of all ETFs by total assets – a sign that its institutional demand has reached a level previously seen only in the top stock and bond ETFs.
In total, ETH ETFs have seen nearly $14 billion in net inflows and have $29 billion in assets under management. Together, they hold 5.4% of the total ETH supply.
During the same period, BTC saw a net inflow of $5.4 billion.
Data source: The DeFi Report, Glassnode
Investors are rotating into ETH, and we think this will continue.
But it won't be a straight line (more on this later).
Options open interest
Data source: Glassnode
As further evidence of where investor interest and risk-taking are flowing, ETH’s options open interest currently stands at over $15 billion, just shy of its all-time high.
This figure alone has increased by 158% in the past two months, and we believe a large portion of this is due to institutional hedging to offset their ETF exposure.
For reference, BTC’s open interest currently stands at $44 billion, down from its all-time high of $54 billion reached in mid-August.
Validator Queue
Data source: validatorqueue
There are currently 927,000 ETH waiting to be withdrawn from the staking queue (worth $4 billion).
This isn’t surprising considering ETH has rallied 81% over the past few months and has rebounded 171% from its April lows.
Meanwhile, 787,000 ETH (worth $3.4 billion) is now entering the validator queue (most likely ETH treasury companies staking their ETH for returns).
How much of this exiting ETH is likely to be sold?
It's hard to say. Much of the staked ETH is held on cryptocurrency exchanges like Coinbase , Binance , and Kraken . Some of this movement could be driven by bull market activity. Of course, some of it could also be sold.
As this reshuffle occurs, we may see some volatility in the price of ETH (and some panic, uncertainty, and doubt, or FUD, on Crypto Twitter).
DeFi: Active Lending
Data source: The DeFi Report, Token Terminal
Ethereum DeFi remains vibrant as total active loans approach $40 billion.
The vast majority (71%) of this came from Aave.
Aave ranks 38th among all US banks in terms of total assets under management/total value locked in smart contracts (TVL).
DEX (decentralized exchange) trading volume
Data source: The DeFi Report
Average daily DEX trading volume has increased by 266% from its April low, with the L1 (first layer) mainnet contributing approximately 67% of the trading volume.
L1 transaction fees
Data source: The DeFi Report
With the rise of DeFi activity, average transaction fees on L1 have surged for the first time since the fourth quarter of last year.
A reflexive flywheel is being set in motion: rising prices → increased on-chain activity → improving fundamentals (demand for block space and higher transaction fees) → rising prices → increased on-chain activity.
Net unrealized gains and losses for long-term holders
Data source: Glassnode
In terms of unrealized net gains and losses for long-term holders, ETH has not yet reached the extreme levels we have seen in past cycles (blue area).
Market value to realized value ratio (MVRV)
Data source: Glassnode
The realized price is a proxy for the average cost basis of ETH’s circulating supply. It’s currently $2,300.
When market capitalization becomes significantly disconnected from realized value, it's a sign that a market is overheating.
The current reading is 1.87, which suggests that, on average, ETH holders are enjoying unrealized gains of 87%.
MVRV was as high as 2.2 in the first quarter of last year and 3.8 in the 2021 cycle.
*Note that this data only captures on-chain ETH (excluding ETFs and ETH held on exchanges).
Where do we go next?
Combining all the above on-chain data, our core conclusion is that although there may be fluctuations in the short term, Ethereum has not yet reached the top of this cycle, and its long-term upward trend remains solid.
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