Summary
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One address, dormant for two years after acquiring over 10,702 Ethereum at a cost basis of $8 per token in 2016, recently liquidated the entire position for approximately $16.86M at a price of $1,576 per ETH.
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Another long-term holder, inactive for three years, sold a tranche of 7,974 ETH for about $11.8M at $1,479 per ETH. While this suggests partial selling, the wallet reportedly still retains a significant balance of over 30,606 ETH, currently valued around $45.7M.
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A different example shows an individual who bought 5,001 ETH in 2017 at an average cost of $277 (totaling roughly $1.38M). They commenced selling this position a month ago and has now exited entirely, realizing a total profit estimated at $8.66M. It’s worth noting that had these holdings been sold at the all-time high price for ETH, the potential profit would have been significantly higher, around $23 million.
The Ethereum network, represented by its native cryptocurrency ETH, appears to be facing a difficult phase.
There are growing indications that capital and user participation are increasingly moving away from Ethereum and toward competing Layer 1 platforms, notably Solana and Sui.
Even the Layer 2 solutions designed to enhance Ethereum seem to be experiencing headwinds.
It is clear that Ethereum is currently struggling.
This assessment isn’t merely limited to observations on social media platforms like the rebranded X; it is supported by tangible evidence from on-chain data.
The health of the network, as revealed by key metrics, suggests unfavorable conditions.
For example, the trading relationship between ETH and Bitcoin (BTC) shows that Ether is underperforming significantly.
Analyzing the Current State of Ethereum
Numerous developments are unfolding within the Ethereum ecosystem, but not all of them are positive.
While it benefits from being the pioneering smart contract platform, this initial advantage appears to be diminishing.
Comprehensive on-chain metrics uniformly indicate a negative trajectory across almost every significant parameter tracked on the network.
Let’s delve into some specific examples of this data.
Reduced Developer Involvement
Crypto market analyst Miles Deutscher has highlighted a general downturn in developer activity within the cryptocurrency space, noting that engagement levels are currently comparable to the lows last seen in 2018.
He attributes this decline to various factors, including a potential shift of interest towards areas like Artificial Intelligence (AI).
This trend seems to be impacting the Ethereum ecosystem more severely than others.
Capital Relocating to Other Blockchains and L2s
Aside from those selling off their Ether assets, another group of users is choosing to redeploy their capital on alternative Layer 1 chains.
Prominent destinations for this capital migration reportedly include Solana, Sui, and the derivatives trading platform Hyperliquid.
Reports indicate substantial net monthly outflows from Ethereum, amounting to approximately $2.5 billion.
This outflow figure also encompasses funds moving into Ethereum’s own Layer 2 solutions, such as Base and Arbitrum, indicating a dispersion of value away from the mainnet.
Impact on ETH Exchange-Traded Funds
The trend of persistent negative flows in ETH ETFs is relevant here.
A straightforward explanation for this lies in how institutions evaluate investment options.
Running an Ethereum validator node, while offering rewards for staking, is perceived as both complex and capital-intensive.
The potential yield from staking currently ranges from 3% to 4%.
This return is often viewed unfavorably compared to the yields offered by less volatile instruments like U.S. Treasury bonds, which have recently exceeded 4%.
Institutions seeking yield with lower operational overhead may therefore prefer bonds.
The Performance and Impact of Layer 2 Solutions
How are Layer 2 solutions impacting the broader picture for Ethereum and their own ecosystems?
Initially, Ethereum embraced L2s as a critical strategy to tackle its long-standing scalability issues and lower transaction costs. L2s have indeed been successful in offloading activity from the mainnet.
This success seems to have inadvertently contributed to a decrease in activity directly on the Ethereum mainchain.
Much of the current transaction volume is now concentrated on a select number of major L2s or has shifted entirely to rival L1 blockchains.
Also Read: Ethereum’s ‘Pectra’ update might impact use and validation
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