While the price of bitcoin (btc) soared to a 19-month high this weekend, ethereum (eth) remained on pace, topping $2,200 for the first time since May 2022.
CryptoQuant's on-chain analysts have identified three drivers behind the cryptocurrency's stellar performance over the past month.
Ultrasound money works
As eth-is-rising-from-an-onchain-perspective?utm_source=telegram&utm_medium=sns&utm_campaign=Quicktake&utm_content=MAC_D” data-wpel-link=”external” target=”_blank”>shared According to analyst MAC_D, eth broke a key resistance/support level at $2,000 last week, which marks the average price at which ethereum users began staking eth on the network.
“It is the average unit price for investors who want to hold eth for the long term,” the analyst wrote. “Most long-term investors have turned to earnings, which will likely act as a key support.”
Staking requires users to lock their eth within the ethereum network to earn a future return denominated in more eth. Stakers are assumed to be high-conviction investors, as staked eth is generally considered non-transferable (although liquid staking solutions like Lido have helped remedy that limitation).
According ultrasound.money, the issuance reward for ethereum stakers is currently approximately 3.1% annually. There are now over 34 million eth staked in the beacon deposit contract worth over $75 billion.
The bet began with the Merge upgrade last year, which also drastically reduced the issuance rate of new eth. This, combined with the network's transaction fee burning mechanism, has made eth issuance net negative, earning it the nickname “ultrasonic money.”
MAC_D noted that this deflationary phenomenon has “intensified” since last month amid increasing network activity.
“As a result, the total supply began to decrease sharply and since the news was announced, the total supply has decreased by -82,861 eth,” the analyst explained.
ethereum ETF Hype
Much of the growth in on-chain activity since last month has been driven by enthusiasm for a potential ethereum spot ETF, which global investment giant BlackRock filed for on November 10.
Although approval of such a product is not expected for some time, BlackRock's support has helped spur market optimism that it is on the way. The change in attitudes is reflected in the Grayscale ethereum Trust crypto-products/grayscale-ethereum-trust” data-wpel-link=”external” target=”_blank”>discountwhich has reduced from 59% in December last year to 14.58% today.
“This can be seen as one of the reasons why massive buying of fiat products by institutional investors drove eth higher,” MAC_D concluded.
eth is up 19.6% over the last month, while btc is up 18.6%.
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