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Ethereum (ETHUSD) Testing Key 4K Level, September High

By:

CFA, Founder Tradable Patterns

Ethereum Fundamentals

1) Market Cap

Ethereum (ETH) was vastly outshined in market cap performance during November by leading alts like CRO.

Source: https://coingecko.com, https://www.theblockcrypto.com

2) Hashrate

The Ethereum hashrate has begun pulling back in response to the correction in Ethereum (ETHUSD) these past few weeks.  Nevertheless, Ethereum’s hashrate remains near a recent record high as the Chinese miners who relocated to other jurisdictions (especially to the United States and Kazakhstan) in July-August have come back online, resuming production.  Ethereum’s hashrate saw a dramatic July pullback after topping in late June at roughly double the prior high in 2018, due to the escalated crackdown since June on Chinese miners and exchanges by the Chinese government.

Source: https://bitinfocharts.com

3) Network Fees

Ethereum network average fees have greatly exceed that of Bitcoin snice August 2021, reflecting rising Ethereum congestion due to the rapidly growing use of stablecoins, DeFi, Gaming apps and NFTs (launched on Ethereum).  The high fees and long confirmation times have driven many of these apps onto competing blockchains or Ethereum sidechains.  The high Ethereum fees and the slow Ethereum network remain an issue despite the August 4th network implementation of EIP (Ethereum Improvement Proposal) 1559 which algorithmically sets a base transaction fee (attempting to keep the fee fair and prevent it from soaring prohibitively high).

Source: https://bitinfocharts.com

4) Wallet Addresses

Since May 2021, the number of active ETH wallet addresses has tracked fairly closely that of BTC.

Source: https://bitinfocharts.com

Click here to read the full 32 pg Premium Report, which includes all of Ethereum’s fundamental analysis, industry fundamentals, along with technical and fundamental analysis of Bitcoin and Ripple.

Industry Fundamentals

The crypto universe is just above USD 2.44T in market cap as of Nov 28th.  Sentiment has weakened with inflation fears sending the US dollar surging in the last half year, increasingly pressuring Bitocin and the broader crypto sector.  The crypto industry retail market is flagging in momentum with Coinbase (COIN) and Robinhood (HOOD) serving as a good proxy.  Robinhood’s Q3 crypto revenue fell 78% from its Q2 number.

1) DeFi

The DeFi market cap is just above USD 144B as of Nov 28th (as per CoinGecko), with DeFi representing above 5% of the entire crypto market and 30% of Ethereum’s market cap.

Source: https://coingecko.com

A key factor behind the surge in activity on decentralized exchanges (DEXs) like Uniswap is the ability to participate on DeFi project tokens before they list on centralized exchanges.  For DeFi to continue to grow, DeFi projects’ll need to become more user-friendly for the mainstream masses and collaborate more with the more popular centralized exchange (CEX) partners in packaging and distribution.  Regulators will eventually sweep in as well on this space, as much of what’s available to trade in DeFi are arguably securities.

Source: https://coingecko.com, https://www.theblockcrypto.com

Coinbase’s volumes have been roughly twice in recent months that of the leading decentralized exchange Uniswap’s.

Source: https://coingecko.com, https://www.theblockcrypto.com

The majority of DeFi activity has been in lending and DEXs.

Source: https://debank.com, https://www.theblockcrypto.com

2) Stablecoins

Stablecoins provide an onramp and offramp for those looking to enter or exit the crypto ecosystem in jurisdictions like China where crypto cannot be converted directly into fiat apart from through the grey practice of dealing with OTC brokers.  Often with new Tether (USDT) issuances, Bitcoin sees a surge in price shortly after through fresh fiat entering the crypto ecosystem and looking for long exposure in Bitcoin.  Crypto market volatility also tends to result in exiting of Alt Coins into USDT.

Liquidity on USDT is higher than with newer, competing USD-backed, independently audited stable coins (e.g. USDC, PAX, TUSD), due not in small part to USDT enjoying first mover advantage.  Aside from USDT benefiting from network effects resulting from having the longest established history, USDT also has crosschain compatibility.  As of Nov 28th, 2021, USDT continues its slide in its stablecoin market share towards 55%, still benefiting from the superior liquidity that comes from being listed on more crypto exchanges.  USDT’s trading volume on any given day is generally at least twice that of Bitcoin’s.  In August 2020, USDT’s daily value transferred of USD 3.55B exceeded Paypal’s equivalent metric of USD 2.94B (if pro-rating its Q2 figure).

Bitfinex and Tether were fined an additional USD 42.5M in mid October for fully backing Tether only one-quarter of a period between 2016-2018, for comingling of corporate funds with reserve funds and for holding reserve funds in non-cash equivalent products.  This follows the settlement in late February 2021 of USD 18.5M with the New York Attorney General, where Bitfinex was accused of not fully backing at times its Tether issuance with US Dollars.  With Bitfinex/Tether’s legal overhang behind it, and Bitfinex’s first ever disclosure of its reserve mix in mid May, any concerns over USDT usage (other than in New York state) being barred by US government authorities (and its impact on BTC liquidity) have dramatically lifted. 

Click here to read the full 32pg Premium Report, including all of this week’s industry fundamentals, and all technical and fundamental analysis of Ethereum, Bitcoin and Ripple.

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