A Brief Analysis of ETH's Recent Price Performance and Direct Influencing Factors

Author: duoduo, LD Capital

Recently, Bitcoin has been rising strongly, making several attempts to break through the resistance range of 28000--28500; ETH, on the other hand, has been relatively weak, with only one test of the resistance level at 1750. This article briefly analyzes ETH's recent price performance and the possible influencing factors.

1. Price Performance

ETH/BTC: In a Downtrend Since the 2022 MERGE

In the past year, ETH has been in a weak position relative to BTC. Looking at the ETH/BTC indicator from 2022 to now, it was in a downtrend from early 2022 to June, dropping from around 0.081 to about 0.050. Subsequently, due to the positive effects of the merge, it rebounded and returned to around 0.8 in September 2022. After the merge was implemented, this indicator has been in an overall downtrend, currently at 0.058, which is close to the weekly EMA200.

However, from a long-term perspective, ETH/BTC is in a growth state. Extending the time scale, during the bear market of 2018, ETH/BTC reached a low of 0.01, while in the current bear market from 2022 to now, ETH/BTC recently reached 0.05. This is mainly due to the development and growth of the ETH ecosystem, which has accumulated a significant amount of on-chain value compared to the previous bear market.

Source: tradingview

Technical Indicators

On the daily chart, after falling on August 18, ETH has been below the EMA200, and the MACD has just approached the zero axis. In contrast, BTC stood above the EMA200 on October 1, and the MACD also broke through the zero axis, entering the positive territory.

2. Influencing Factors

The strength of ETH is influenced by a very complex set of factors. At the macro level, this includes changes in the Federal Reserve's interest rate policies and shifts in the SEC's regulatory stance. At the micro level, it includes the development of the ETH ecosystem, the rise of layer two solutions, token consumption and supply, and market participation enthusiasm. Here, we analyze only the factors that have shown significant changes recently.

Gas Consumption Significantly Decreased, ETH Returns to Inflation

In August and September 2023, on-chain trading activity entered a quiet period. On one hand, there were no new hot projects on-chain, leading to reduced trading; on the other hand, several large potential airdrop projects experienced significant hacking incidents and rug pulls, which dampened interaction enthusiasm.

Gas on the ETH chain has generally remained below 10 gwei. The decrease in on-chain activity and the reduction in gas fees have resulted in ETH supply exceeding consumption over the past 30 days, restoring inflation, with an inflation rate of 0.275%, adding 27,000 ETH in the last 30 days.

However, overall, since the merge, ETH has still been in a deflationary state, with an inflation rate of -0.217% since the merge, resulting in a total reduction of 277,000 ETH.

Source: ultrasound.money

Staking Slows Down, Queue for Staking Tokens Decreases

Currently, there are 844,000 active staking nodes on Ethereum, with approximately 27 million ETH staked, resulting in a staking rate of 25.33%.

Overall, the number of new stakings has significantly decreased compared to the second quarter of 2023.

Source: OKlink

Currently, there are 5,723 nodes waiting to participate in staking, while Ethereum can add a maximum of 2,700 new staking nodes per day. Therefore, without new tokens, it would only take 2 to 3 days to process the queue. This is the shortest period for waiting staking nodes since the Shanghai upgrade.

Source: beaconcha.in

Founder's Continuous Sale of ETH Over the Past Two Months

Addresses related to founder Vitalik have been continuously transferring ETH to exchanges. On October 7, he transferred another 1,000 ETH (approximately $1.64 million) to Bitstamp. In the past two months, this address has deposited a total of 4,400 ETH (approximately $7.23 million) into Bitstamp.

In terms of quantity and amount, this is not enough to impact ETH's price. However, it can affect investors' confidence in holding the token.

FTX Hacker Selling ETH, Leading to Short-Term Selling Pressure

The main event affecting ETH in the past week has been the FTX hacker starting to sell ETH and buy BTC since October 1.

In November 2022, shortly after FTX filed for bankruptcy, hundreds of millions of dollars began flowing out of the exchange's balances into hacker addresses. On November 21, 2022, the hacker dispersed 185,000 ETH (worth $308 million) across 13 addresses and then entered a dormant state. After 10 months of dormancy, the hacker began transferring and selling ETH from these addresses starting September 30.

From September 30 to October 6, 75,000 ETH (worth $12 million) was transferred from five addresses. Among them, 71,000 ETH was exchanged for BTC through THOR Chain. 2,700 ETH was converted to 165 tBTC and bridged back to the Bitcoin network via Threshold Network. 1,500 ETH was transferred through the privacy network RAILGUN_Project. This also led to THOR Chain announcing a temporary maintenance status on the afternoon of October 6.

Currently, the hacker still holds 110,000 ETH (worth $17.6 million) across eight addresses on the Ethereum network. Five of the original 13 addresses have already been emptied.

*Source: *mest.io

Contract Data

The main focus is on changes in positions, with ETH holdings overall in a downward trend. In January 2023, when it surged to $1,600, holdings were at an annual high of about 2.37 million. When it surged to around $2,000 in April, holdings were 1.22 million, the second-highest point of the year. Before the drop on August 18, holdings were 890,000. Current holdings are 730,000.

Compared to the annual high at the beginning of the year, holdings have decreased by 45%; compared to the second-highest point of the year, holdings have decreased by 37%; compared to holdings before the drop on August 18, holdings have decreased by 17%.

Source: coinglass

3. Conclusion

In the long term, compared to the previous bear market, ETH has been in an overall upward trend against BTC due to the development of its ecosystem, rising from 0.01 to above 0.05. However, in the past year, ETH has been in a weak position relative to BTC, with the exchange rate in a downtrend.

Fundamentally, since the merge, ETH has been in a deflationary state, with an inflation rate of -0.217%. However, in the past two months, on-chain trading has been quiet, gas revenue has significantly decreased, and ETH has entered an inflationary state, with an annualized inflation rate of 0.275% over the past 30 days.

In terms of staking data, since the Shanghai upgrade, ETH staking has been continuously increasing, with the current staking rate at 25.33%. However, recent new staking data has slowed down. The number of new stakings has significantly decreased compared to the second quarter of this year; and the number of nodes waiting to participate in staking is also low, marking the shortest period since the Shanghai upgrade.

In terms of selling pressure, the founder has been continuously selling ETH. Although the quantity is not large, it negatively impacts confidence in holding the token. Additionally, the selling of ETH by the FTX hacker to buy BTC has led to significant short-term selling pressure.

In terms of contract data, ETH contract holdings have been in a downward trend this year. Compared to the annual high at the beginning of the year, ETH contract holdings have decreased by 45%; compared to the second-highest point of the year, holdings have decreased by 37%; and compared to holdings before the drop on August 18, holdings have decreased by 17%.

Note: The data in this article is as of October 7, 2023.