- The growth in the number of users was not necessarily driving network utilization for Ethereum.
- ETH’s exchange inflow hit its highest value since the Merge on 2 May.
Users in the crypto space showed significant interest in Ethereum [ETH] over the past few months, as evidenced by a growth in both its user base and the demand for its blockspace.
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However, the growth in the number of users was not necessarily driving network utilization. Analyst ali_charts highlighted that the monthly average of daily active addresses on the largest proof-of-stake (PoS) network was below the yearly average for most parts of 2023.
#Ethereum | Increased active users, transaction volume, and blockspace demand indicate healthy $ETH network adoption.
However, the monthly average of active #ETH addresses has been rejected by the yearly average, suggesting weak network fundamentals and reduced utilization. pic.twitter.com/c5Lsl7hhmf
— Ali (@ali_charts) May 1, 2023
All quiet on ETH’s front?
One of the most powerful measures of a blockchain’s utilization is the Network Value-to-Transaction (NVT) ratio. According to Santiment, Ethereum’s NVT Ratio spiked in the last few days. This implied that the network’s market cap had outpaced on-chain network activity.
Moreover, the number of new active addresses getting created on the chain tumbled, significantly impeding network growth. The velocity indicator, which shows how frequently ETH tokens change addresses daily, showed a decline after an uptick was seen earlier. This reinforced that transaction activity was muted on Ethereum.
Source: Santiment
Ominous signs or…
While concerns around network utilization rose, another intriguing development caught the eye of crypto watchers. Santiment took to Twitter to highlight that 2 May saw one of the largest self-custody to exchange transfers in the last five years, with a $505 million transfer of ETH tokens into Binance. As a result, ETH’s exchange inflow hit its highest value since the Merge, which occurred on September 2022.
However, the latest trend could also signal their growing trust in centralized exchanges, which hit rock bottom following FTX’s collapse in November last year.
? With a $505M transfer of #Ethereum tokens on to #Binance today, this is one of the largest self custody to exchange transfers in 5 years. It also spiked the $ETH network to its largest daily exchange supply increase since the day before the #merge. https://t.co/FTFNugMg16 https://t.co/FMfHl3V3zB pic.twitter.com/HAmtunceln
— Santiment (@santimentfeed) May 1, 2023
Realistic or not, here’s ETH’s market cap in BTC’s terms
As far as demand for ETH futures was concerned, the nominal value of Open Interest (OI) stayed flat over the past few days, signifying sluggish speculative interest for the second-largest altcoin by marketcap.
However, the funding rates across most exchanges were positive, which reflected the dominance of long-term traders. At press time, ETH was valued at $1,830, down nearly 1% in the last 24 hours.
Source: Coinglass
