On Thursday, the price of ETH soared to its new ATH to near $1700. Based on data from MXC exchange ETH/USDT rose from $715.52 to $1694.76 in the past two months with an increase of 136.85% in 34 days. ETH/BTC had a rise of 90.46% in the same period, which indicates that although BTC stopped increasing after it reached ATH at $41964.11, ETH is still paving its way to a new high.
Statistics show that the customers of Grayscale trust increase their holdings of ETH, the number of ETH staked to ETH2.0 smart contracts has risen, and the TVL in DeFi are the main reasons for pushing the price of ETH to a new high.
At the same time, with the soaring demand for ETH staking, the amount of CEXs’ ETH reserves has reduced sharply, further leading to an imbalance between ETH supply and demand on the secondary market.
ETH reserve’s sharp drop pushes its price upAccording to data company CryptoQuant, from November 2, 2020 to December 11, 2020, the ETH price curve and the ETH reserve quantity curve on the trading platform maintained a high degree of overlap. Subsequently, the ETH reserve quantity gradually decreased, and its price increased accordingly.
From December 11, 2020 to February 4, 2021, the number of ETH reserves decreased from 22,263,100 to 21,098,990, a decrease of 1,164,12, and its price rose from $554.12 USDT to $1666.19 USDT, an increase of 200.69% in the past two months.
The relationship between the ETH2.0 staking rate and the price of ETHSince December 1, 2020, the number of ETH staked in ETH2.0 smart contracts has been increasing. ETH2.0 LaunchPad and CryptoQuant data show that there are currently 2.95 million ETH staked in ETH2.0 smart contracts. The price curve of ETH is similar to the staking rate curve, i.e., it grows as the staking rate increases.
The launch of ETH.0 expands the scope of application of ETH as an interest-bearing asset. The current staker’s expected APY is 9.1%. The annualized return is much higher than traditional financial products, which attracts more institutions and individuals. Purchasing ETH from the secondary market and storing it in the ETH2.0 smart contract led to a sharp decrease in the amount of ETH reserves in CEX. Such a supply-demand relationship promoted the increase in the price of ETH.
ETH is the settlement currency in the DeFi boomOn January 4, the total value locked of DeFi assets on Ethereum reached $32.483 billion, thanks to the abundance of products such as DEX, insurance, synthetic asset, and liquidity mining.
So far, the market value of DeFi Top 10 project assets has risen from US$1.6 billion to a maximum of $19.8 billion; in December last year, the total trading volume of DEX reached $19.2 billion. Uniswap had beaten Coinbase’s US$348 million with a daily trading volume of $420 million.
The popularity of DeFi has made Ethereum more important as the settlement layer. While ETH plays the most important role in DeF. At the settlement layer, you have to pay in ETH for every transaction or asset transfer on Ethereum, for example, when you provide liquidity on Uniswap (DEX) to and or borrow some assets on AAVE.
Institutions are optimistic about ETH, pushing its price to go upGrayscale Investment’s latest Ethereum valuation report stated: “Bitcoin is the preferred store of value in the digital ecosystem, and Ethereum has become a leading financial infrastructure, with more than $12 billion in daily settlements.”
It is for the above reasons that ETH has caused great interest among institutional investors in Ethereum. In early January this year, Grayscale resumed its cryptocurrency trust to make new investments, and its total ETH holdings increased by 242% in the past three months.
On February 3, Grayscale’s GBTC holdings increased by 16, and the total holdings were 649,127 BTC; Grayscale ETHE holdings increased by 47,000, and the total holdings were 3.002488 ETH.
Grayscale interpreted the report on Ethereum as follows:
1. Currency: Whenever a user deploys a smart contract on the Ethereum network, provides liquidity for applications, or conducts transactions on a centralized exchange, they have to pay the network fees in ETH.
2. Consumer goods: Every transaction on the blockchain will incur a certain fee, which is priced in ETH. As the demand for the network increases, the cost (gas) also increases.
3. Interest-bearing assets: ETH2.0 aims to become a scalable proof-of-stake blockchain and is another key change in the value of ETH. Ethereum 2.0 transforms ETH from a commodity into a productive commodity that we describe. Holders will be able to stake ETH to generate interest. This asset structure is different from any other asset structure in the real world. In Ethereum 2.0, ETH can be used as a commodity for consumption, and it can also be used as collateral for cash flow debt, instead of equity.
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