As Ethereum approaches the stage 0 of its Serenity upgrade – known as Ethereum 2.0, there appears to be a wave of optimism around this milestone. One of the most-reported news in these areas is that Grayscale’s ETH Trust traded at a premium of 700% relative to the spot price. Although this can be interpreted as a sign that the organization is interested in ETH, the data on the chain and the indicators of derivative products can more clearly reflect the behavior of the initial ETH holders. With the arrival of the initial stage of ETH2.0, the use of IntoTheBlock indicators allows us to draw some valuable laws.
The profitability of the account address indicates that ETH enters the market at a low price
IntoTheBlock’s Historical In/Out of The Money “HIOM” uses the average cost of an address in terms of a specific token (here ETH) to analyze the position on the blockchain. On this basis, HIOM uses some option terminology to calculate the percentage and total number of “in-the-money options” or addresses that profit on the position. In addition, by comparing changes in HIOM over time, we can determine buying and selling activities based on the number of addresses that profit at a specific price level.
At the time of writing, the price of ETH is about $244. The last time the ETH price stayed near this level for a long time was in early March, before the “Black Thursday” price fell by 40% on March 12. At the time, 18.16 million addresses (slightly less than half the number of addresses with balances) were in the money, and 17.29 million addresses (47%) would lose money if sold. Due to the panic caused by the epidemic of the Covid-19, the price of ETH fell sharply, but it recovered within three months.
If we compare the current Historical In/Out of The Money with what we saw in early March, we will find signs of new buyers entering the market and existing addresses accumulating at lower prices. In the chart below, we can see that the number of currency addresses has increased by more than 4 million in just three months when the ETH price is $244:
Because the total number of addresses holding ETH also increased during this period, which indicates that new buyers entered the market after Black Thursday. In addition, the number of addresses with out-of-the-money options decreased by 1 million, which indicates that some users have suffered losses in their positions. Eventually, more than 55% of existing ETH holders profited from their positions, but it may also be that many holders settled in ETH at a lower price, thereby reducing the average cost.
The number of ETH firm holders and addresses with balances reaches the highest level in history
By analyzing the total number of addresses holding ETH balances, another sign of ETH purchases can be observed. As mentioned earlier, the total number of addresses holding ETH has been increasing since March. In fact, since 2017, it has been in a continuous upward trend, as shown in the following figure:
Since the beginning of this year, 6.36 million registered addresses have joined the ETH network, with more than one million new addresses added each month. The significant increase in the number of addresses holding ETH makes it exceed the number of addresses holding BTC, and also makes ETH the only blockchain with more than 40 million addresses with balances.
IntoTheBlock classifies firm holders as holding addresses for more than one year. The number of strong holders of ETH has also reached a record high. The number of tokens held for more than one year reached 61.27 million, which means that 55% of the 111 million ETH in circulation belong to these firm holders. In addition, despite the volatility in March, the number of strong holders throughout the year has maintained steady growth. In the context that ETH2.0 is expected to enter Phase 0 this summer, these trends can be interpreted as a sign of long-term investment in the ETH blockchain.
Perpetual Swaps Open Interest remains at quarterly high
In recent years, derivatives, including perpetual contracts, have become an important part of the crypto ecosystem. As derivative products grow significantly in proportion to the spot market, their impact on token prices has received closer attention. The trends observed in ETH derivatives are related to the increase in institutional acceptance.
Although the first US-regulated ETH futures contract was launched on ErisX last month, unregulated exchanges still dominate the market.
By summarizing the open positions of ETH perpetual contracts, we can observe the total amount of USD in open contracts of ETH contracts. As shown in the figure below, on June 1, the open position of the ETH perpetual contract reached $413.5 million. Similarly, in terms of the trend of the on-chain indicators, this is the first time this level has been reached since the beginning of March this year.
Over the past month, a 56% increase in open positions has been matched by a 30% increase in the price of ETH, indicating a bullish positioning in the derivatives market. Despite a slight decline since June 1, the overall trend of open positions in ETH perpetual contracts indicates that the institutional exposure of institutions to the second largest cryptocurrency is increasing.
In general, as the initial stage of ETH2.0 is approaching, some indicators on the ETH chain and derivative products show the acceptance and use of ETH. Key indicators such as balance and number of addresses are at historically high levels, and the fundamentals of ETH seem to be stronger than the 2017 peak.
In addition, the firm holder’s profitability and the significant increase in perpetual contracts indicate that investors have been buying ETH for a long time after Black Thursday. Although not sure whether the price will follow these indicators, the main indicators of ETH all show strong usage and optimism before the protocol upgrade.