Ethereum Wallets Dominate Crypto Participation
A recent report by Chainalysis reveals that Ethereum (ETH) wallets make up the majority of crypto participants in July 2023. While Bitcoin (BTC) wallets have reached 50 million, ETH balance-holding addresses have surged to 79 million.
- Bitcoin has the lowest volatility risk, with 4,500 wallets holding 50% of the asset supply.
- ETH, on the other hand, has a higher chance of price swings, as only 131 wallets account for half its supply.
Staking Pools Enhance Ethereum Liquidity Post-Merge
Staking pools like Lido and Rocket Pool offer investors rewards based on their deposited Ethereum. Despite ETH’s concentration in a few wallets, the distribution of ownership ensures that individual withdrawals are unlikely to significantly impact the price.
- Staking pools, known as “liquid-staking” DeFi protocols, preserve Ethereum liquidity while providing long-term staking benefits.
- Lido issues a derivative token called “staked ETH” for each deposited Ethereum, which can be invested in decentralized finance protocols for returns.
Ethereum and USDC Wallets Hold Significant Token Supply
Ethereum and USDC wallets consistently rank high in terms of tokens held by active traders. As of July 2023, active wallets possess around two-fifths of the USDC supply and nearly half of all ETH.
This activity is likely correlated with the widespread use of ETH and USDC in decentralized finance (DeFi), as traders convert US dollars to dollar-pegged stablecoins for DeFi services.
Ethereum Wallets Outpace Bitcoin Holders in Activity
From Q3 2020 to Q1 2022, Ethereum wallets have been more active compared to Bitcoin holders, consistently exceeding BTC activity during the 2021 bull market.
Bitcoin holders tend to take a long-term view, with most of the supply held by wallets that do not frequently transact. Exchanges have only held 20% of all BTC since 2020.
Following the failure of Terra in mid-2022, several companies seem to have accumulated the asset in anticipation of the next bull run.
Hot Take
The dominance of Ethereum wallets in crypto participation and the popularity of staking pools highlight the growing importance of Ethereum in the cryptocurrency space. With its active user base and liquidity preservation through DeFi protocols, Ethereum continues to be a significant player in the market. As more companies and investors recognize its potential, Ethereum’s value and influence are expected to further increase.
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