- According to Santiment, ETH funds on exchanges have reached a two-year low.
- The total value locked up in the DeFi sector has exceeded the previous all-time high.
In the last 30 days, Ethereum has showed the highest profits within the top 10 by market cap with 22.23%. Only surpassed by Bitcoin (40.17%), ETH’s price seems to be driven by two factors: the launch of the deposit contract for Ethereum 2.0 and the progressive recovery of the DeFi sector. At the time of publication, ETH is trading at $460 with a sideways movement of -0.17% within the last day.
Remarkably, the fundamentals are strong for a continuation of the rally. While the price seems to be entering a consolidation stage, data analysis firm Santiment indicates that the ETH funds on exchanges have touched a two-year low. As the analysis firm notes, this may indicate a reduction of selling pressure on ETH:
The percentage of total $ETH being held on exchanges today (13.35%) has not been this low since November 23, 2018. The almost exact two-year milestone is a positive sign for #Ethereum holders, who have historically benefited when supply held off of exchanges is kept low. It indicates that large whale selloff probabilities will remain limited.
In that sense, crypto trader Josh Rager has set a target of $482. Rager commented that ETH is “slowly grinding up to retest highs from September. A break above $482 and I’ll likely look at $500+ targets for the first time since 2018”. Entrepreneur and crypto investor Qiao Wang has offered another interesting perspective. Via Twitter, he claims:
I continue to see more and more reasons why ETH could outperform BTC in the next bull run. Perhaps not on a risk-adjusted return basis, but likely on an absolute return basis.
However, he pointed out that investors could make more profit by diversifying their portfolio into Bitcoin and “blue chips” from the DeFi sector – tokens that offer higher profit returns than ETH. In that sense, he stated:
I think you’ll do pretty well over the next year or so. But if you want to hold your portfolio to the institutional standard, you need to consider the possibility that BTC + DeFi is a much better portfolio construction. Not financial advice.
Wang also revealed that he owns more ETH than BTC and considers sending the necessary 32 ETH to the Eth2 deposit contract but is apprehensive because “the economics doesn’t make much sense”. Other investors have expressed similar concerns. In addition, the relationship between an increase in the price of ETH and the incentives to keep the funds in the Eth2 deposit contract could be inversely proportional.
Investors who send 32 ETH to the deposit contract must keep it “locked” for two years to receive the staking rewards or 60% of that time, according to Vitalik Buterin. In a bull market with a constant rise in the price of ETH, investors may be inclined to maintain liquidity and have the freedom to take on profits. At the time of publication, enthusiasm for the deposit contract remained modest. So far only 84’512 ETH have been deposited from the 524’288 ETH required to start phase 0.
DeFi fever back on Ethereum?
On the other hand, data from DeFi Pulse shows that the total value locked (TVL) in the DeFi sector has reached a new all-time high in the last two days. After a period of stagnation at $12 billion, this figure currently stands at $13.75 billion.
The TVL of major protocols has also skyrocketed with Uniswap maintaining its dominance of 21.70% and an all-time high of $3 billion. The price of UNI has had gains of 14% in the last 24 hours, surpassing COMP (12.8%) and AAVE (14.7%). In general, the most popular tokens of the DeFi sector have seen strong gains in the last few days, which nourishes hopes for a further flourishing of the DeFi sector.