Johnny Walker
- Ethereum’s main value driver is centered around asset speculation, says CoinShares.
- Ethereum ETFs posted $62.5 million in net inflows on Tuesday, their highest since August 6.
- Ethereum could decline to $2,395 after breaching a key support level.
Ethereum (ETH) is down over 2% on Wednesday following CoinShares’ recent report detailing token transfers and asset speculation as some of the key value drivers for ETH. The report also highlighted how the recent Mainnet upgrade has complicated the Layer 1 (L1) and ETH’s economic design.
Daily digest market movers: Ethereum key value drivers
CoinShares recently released a report detailing key features that drive value for Ethereum. The report noted that token transfers, largely dominated by ETH and stablecoins, are Ethereum’s key value drivers.
“It demonstrates the ongoing importance of ETH as the network’s native asset and the critical role stablecoins play in the broader industry,” wrote CoinShares analyst Matthew Kimmell
Kimmell added that while Ethereum has grown to boast over a billion dollars in user fee spend annually, most activities within its ecosystem are “highly concentrated into a few use cases centered around asset speculation.”
Ethereum Fee Spend
The report also highlighted that Ethereum has focused heavily on scaling via Layer 2 solutions, but this has come at the expense of cannibalizing Layer 1 and complicating its relationship to ETH.
“In our view, the latest major change, EIP-4844, which strongly incentivized Layer-2s, has worked directly against the economic design benefits of EIP-1559, which tied the value of ETH to its Layer 1 platform demand,” noted Kimmell.
Meanwhile, Ethereum ETFs recorded net inflows of $62.5 million on Tuesday, their highest inflow data since August 6. BlackRock’s ETHA was largely responsible for the positive flows, with over $59 million in inflows. Grayscale’s ETHE, on the other day, witnessed zero net flows.
Ethereum risks a decline to $2,395
Ethereum is trading around $2,570 on Wednesday, down over 2% on the day. The top altcoin has seen $15.05 million in liquidations in the past 24 hours, with long and short liquidations accounting for $10.15 million and $4.9 million, respectively.
On the 4-hour chart, Ethereum breached a key rectangle’s support level at $2,595 to balance a market inefficiency seen on Sunday. If its price fails to bounce off any of the 50-day, 100-day and 200-day Simple Moving Averages (SMAs), ETH could move toward the $2,395 level.
ETH/USDT 4-hour chart
The Relative Strength Index (RSI) momentum indicator has declined below its neutral level, while the Stochastic Oscillator is in the oversold region.
Cryptocurrency metrics FAQs
The developer or creator of each cryptocurrency decides on the total number of tokens that can be minted or issued. Only a certain number of these assets can be minted by mining, staking or other mechanisms. This is defined by the algorithm of the underlying blockchain technology. Since its inception, a total of 19,445,656 BTCs have been mined, which is the circulating supply of Bitcoin. On the other hand, circulating supply can also be decreased via actions such as burning tokens, or mistakenly sending assets to addresses of other incompatible blockchains.
Market capitalization is the result of multiplying the circulating supply of a certain asset by the asset’s current market value. For Bitcoin, the market capitalization at the beginning of August 2023 is above $570 billion, which is the result of the more than 19 million BTC in circulation multiplied by the Bitcoin price around $29,600.
Trading volume refers to the total number of tokens for a specific asset that has been transacted or exchanged between buyers and sellers within set trading hours, for example, 24 hours. It is used to gauge market sentiment, this metric combines all volumes on centralized exchanges and decentralized exchanges. Increasing trading volume often denotes the demand for a certain asset as more people are buying and selling the cryptocurrency.
Funding rates are a concept designed to encourage traders to take positions and ensure perpetual contract prices match spot markets. It defines a mechanism by exchanges to ensure that future prices and index prices periodic payments regularly converge. When the funding rate is positive, the price of the perpetual contract is higher than the mark price. This means traders who are bullish and have opened long positions pay traders who are in short positions. On the other hand, a negative funding rate means perpetual prices are below the mark price, and hence traders with short positions pay traders who have opened long positions.
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