Ethereum On-Chain Activity Cools During Macro Uncertainty

Investor concern over the impact of the Fed’s monetary policy decisions on US financial markets has also affected crypto markets over the past 2 months. In particular, we have seen cryptocurrency prices generally move closer to risky assets such as tech stocks. Correlations between growth/tech stocks are currently high for both Bitcoin and Ethereum, but historically we have seen that Ethereum has been more correlated to growth/tech than Bitcoin.

The price drop has quelled much of the speculation that usually drives crypto markets and some of the on-chain activity has also subsided. A large part of the volume of transactions is carried out by institutions and, as can be seen in the following indicator, by the large volume of transactions. This week, between $3 and $6 billion is traded daily on the Ethereum blockchain, while an all-time high of $300 billion was reached in the summer of last year.

Large volume of USD transactions as of February 15 through the IntotheBlock indicator.

Large transactions are considered those in which an amount greater than USD 100,000 was transferred. In this case, the High Volume USD Transactions indicator measures the aggregate dollar amount transferred in such transactions. Therefore, this drop in trading volume usage could be due to the current macroeconomic uncertainty.

The fall has also been notorious for the fees generated by the blockchain. These are useful for tracking the level of transaction demand on the Ethereum blockchain. Since bull markets increase demand and speculation, average transaction fees tend to be more expensive during these periods. This indicator can be used as an indicator of sentiment and interest on the Ethereum blockchain.

After a substantial price increase, average transaction fees tend to rise further as merchants rush to make a profit. As you can see from the chart, the average fee for a transaction is now around $30, a 40% decrease from the all-time high of $50 seen in the fall of 2021.

Average transaction fees as of Feb 15 through the IntotheBlock indicator.

Regardless of the cooling that these last two metrics show, there is a key indicator that shows that in a long-term horizon the interest in holding and investing in Ethereum continues to increase, and that is the total number of addresses with a balance. In general, an increase in the number of addresses with a balance is positive, as it indicates a stronger and growing user base.

While the total number of addresses with a balance does not exactly match the number of holders, it does provide a valuable proxy for the number of people holding a crypto asset. There are cases where a user can have multiple addresses, but also scenarios where one address can hold funds from multiple users (centralized exchanges).

As you can see in the chart below, the total number of addresses with balances is now over 70 million addresses. This is a metric that hasn’t slowed down since last summer and has been growing at a rate of roughly 10 million every three months since 2017.

Total addresses as of Feb 15 through the IntotheBlock indicator.

In general, the use of Ethereum can vary depending on market conditions and waves of speculation, but it is key that the adoption of Ethereum continues to grow every day, as we have seen. We have continually seen that users are interested in participating by simply holding Ethereum in their wallets or using the decentralized finance applications enabled by blockchain smart contracts. So far, this usage has continued despite uncertainty or bearish macro conditions.

Guest post by Juan Pellicer of IntoTheBlock

Juan Pellicer is a Research Analyst at IntoTheBlock and a Systems Engineer with an interest in DeFi, stablecoins, derivatives, synthetic assets, and NFTs.

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