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The state of crypto – July 2023
Mads Eberhardt
Cryptocurrency Analyst
Summary: Bitcoin hit a 1-year high in June, but both its exchange balance and its 5-year circulating supply declined, indicating that long-term holders are not interested in selling Bitcoins at this price. The exchange balance of Ethereum slipped too, so fewer Ether is to be sold at short notice. However, an increasing amount of Ether is turning active, so the effective circulating supply must be adjusted higher.
Immediately upon interacting with a blockchain, much data becomes publicly available on a public ledger. Analyzing this data may provide crypto traders and investors with helpful insight into the present state of the market. In “The state of crypto”, we take a look at the most important metrics to observe the market based on transaction and trading activity. Our main focus is the two largest cryptocurrencies Bitcoin and Ethereum, and we divide the metrics into short-term and long-term indicators. You find the report for the last month here.
Short-term
The exchange balance of Bitcoin decreased substantially in June. The exchange balance of Ether is nowhere near the one of Bitcoin but was likewise net negative in June, so it once again shows a new all-time low. At present, 9.1% of the Ether supply is on exchanges, down from about 11.3% at the start of the year. The lower exchange balances highlight that fewer Bitcoins and Ether are promptly available to hit the market, potentially hinting at greater market sentiment.
The drop in Ether on exchanges is chiefly attributed to the staking of Ether, as there has been a significant inflow to stake Ether after the Shanghai hard fork in April. These Ether may have been intended to be staked for years but only stored on exchanges until post-Shanghai. On the other hand, holders cannot stake Bitcoin nor utilize it in decentralized applications to the same extent as Ethereum, so the withdrawn Bitcoins may have been acquired recently to enter deep storage far away from any exchange. Although the Bitcoin exchange balance tumbled, both the 30-day moving average of exchange inflow and dormant circulation spiked, indicating that at least some found the 1-year high Bitcoin price of $31,400 in June attractive as exit liquidity. This price surge was mainly driven by the Bitcoin ETF filing by BlackRock.
Long-term
June was another month in which the circulating supply of Bitcoin of the past five years dropped slightly, whereas the circulating supply of Ethereum surged by about 800,000 Ether. The latter is a fairly significant uptick, particularly in the view that it occurred in the span of only one month. We mainly see the rise as a result of more holders staking Ether, but, nonetheless, it is not strictly positive for existing holders, as it increases the effective circulating supply.
On another matter, Bitcoin was subject to one more positive trend, contrary to Ethereum. In June, exchange-traded products saw a net inflow equal to 255.1mn, merely driven by an inflow of 284.2mn to Bitcoin, presumably because of the Bitcoin ETF filing by BlackRock. Ethereum, on the other hand, experienced a net outflow of 29.7mn in the same month, so it appears that more traditional investors are presently keener on Bitcoin than Ethereum.
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