Despite some FUD around Tether, a “double-spend” that wasn’t, and specific claims about Bitcoin and criminal activity despite evidence to the contrary, institutional/whale interest in Bitcoin continued into January 2021, with Grayscale accumulating an additional 45,000 bitcoin (image below) and MicroStrategy purchasing another $10 million worth.
Image credit: Bybt.com
And it wasn’t just the big players purchasing BTC, retail flows towards the top 3 websites in the crypto ecosystem grew substantially (and momentarily peaked) in January (image below).
So, it should come at no surprise then that the percent of supply held by small addresses is also increasing. Addresses holding between 0 and 1 BTC now hold close to 5% of total supply while addresses holding 1-10 BTC increased to about 9.5% of total supply. Even though large holders are accumulating and making all the headlines, supply is also becoming more distributed amongst retail-level investors.
Image credit: CoinMetrics
Eth 2
There is now ~2,873,410 ETH (over $4.0 billion) staked into Eth 2! Current staking yield is ~12.5% (before inflation) and validator uptime remains >98%. Overall, the Beacon Chain is running smoothly and still continues to add validators each day. There are currently ~75,000 active validators and ~15,000 pending validators.
The daily average of rewards earned per validator dipped to 0.007235 ETH this month. However, due to the price increase of ether, the USD value of rewards earned on the network increased ~80% over the same time period. Ethereum’s price increase looks to be supported by a steady increase in active addresses.
Image credit. Glassnode
Another consideration for evaluating ETH2’s network health and decentralization is the distribution of staker deposits on ETH2. According to Etherscan, roughly 50% of all ETH deposits are coming from cryptocurrency exchanges and staking pools (image below). This suggests an equal split between individuals choosing to stake using their own hardware and users choosing to rely on a third-party service provider to stake. It will be important to monitor shifts in this distribution over time as too much ether in the hands of a small number of companies could lead to centralization issues.
Image credit: Etherscan
The percentage of ETH supply held in smart contracts has increased ~19%. This growth is driven, in large part, thanks to the massive growth in the DeFi space. DeFi now has ~7 million ETH in total value locked (TVL). Users are engaging with DeFi projects to earn yields (just like in ETH2 staking). Similarly, the chart highlights the shift in ETH’s evolution towards becoming a productive capital asset with yield. This metric is overall bullish as it indicates that the network is actually being put to use rather than, as in 2017, speculating on various ICO projects. Supporting this claim is the fact that ETH transaction counts have hit all-time highs of 1.2M over in January, which again correlates nicely with active addresses. ETH has separated itself from the pack (second chart below) in regard to total transactions on Ethereum outnumbering BTC + USDT combined by > 2x.
Image credit: CoinMetrics
Image credit: CoinMetrics
ETH DeFi
What's bad for Robinhood is good for DeFi? Decentralized Finance (DeFi) continued its big surge beginning at the start of 2021. Decentralized exchanges (DEX) like Uniswap, SushiSwap, and others are seeing record volumes and helping the overall DeFi market cap burst through to new all-time highs. As the controversy around centralized trading platforms like Robinhood and TD Ameritrade limits user’s buying and selling, the value proposition for decentralized alternative has never been clearer.
Users upset with traditional trading platforms seem to be looking to crypto as an alternative. Reddit forums like r/dogecoin, r/Bitcoin, and /r/Satoshistreetbets saw huge pickups in subscriber counts over the last week, rising by ~400,000, ~224,000, and ~177,000 subscribers respectively.
Image credit: CoinMetrics
LINK
LINK demand for the asset appears to be as high as ever. Over the past several months, LINK’s circulating supply increased by over 50 million due to the protocol's parent company selling some of its share of tokens. Despite this selling and increase in liquid supply, LINK continues to be a leading performer in the alt coin space.
Besides price action, LINK made strides in 2020 on the fundamentals side as well. Accomplishments include:
- increasing the number of oracle price feeds from 25 to ~70
- partnering with Polkadot and providing its middleware service to its DeFi ecosystem dubbed the “Polkadot Defi Alliance”
- also integrating with with Tezos and RootStock
- piloting a proof-of-concept with “DECO”, a privacy-preserving oracle protocol that leverages cryptographic techniques that allows users to prove facts about their web sessions to oracles while hiding privacy-sensitive data.
