Growth and price of Bitcoin and Ethereum

[ad_1]

Often when analyzing the progress of projects like Bitcoin or Ethereum, we focus on the price performance of their native cryptocurrencies, namely BTC and ETH.

However, in this way, we are in fact only analyzing one side of the coin, completely neglecting the other. The fact is that price analysis allows on the one hand to understand what is happening in the short term, but on the other hand, it is only by analyzing the on-chain fundamentals that one can understand the evolution over the long term.

The growth of Bitcoin and Ethereum addresses despite the price

This dichotomy appears clearly and authoritatively when comparing what happened in 2022 simultaneously with the price of Bitcoin and Ethereum, on the one hand, and the number of addresses holding BTC and ETH, d ‘somewhere else.

In fact, recent research from CoinGecko reveals that while BTC and ETH have lost more than half of their market value, the number of Bitcoin and Ethereum addresses with at least $1,000 have instead steadily increased.

The dynamics that develop over the long term, such as the growth in the number of addresses, follow a much more constant and dilated trend than prices. The latter, as we know, follow trends of much shorter duration and, above all, very nerve-wracking.

CoinGecko’s research contains a chart that gives a very good idea of ​​this contrast.

Bitcoin (BTC)

Starting with Bitcoin, one immediately notices how, over the four quarters of 2022, the orange price line has declined pretty much consistently. In fact, between $47,000 in the first quarter and $16,600 in the fourth, the drop was 65%.

Moreover, it wasn’t even a regular drop, as it happened specifically due to three major meltdowns, two of which were in Q2 (Terra and Celsius) and one in Q4 (FTX).

Nevertheless, during the same period, the number of Bitcoin addresses on which at least 0.1 BTC would have been held has steadily increased, so much so that by the end of the year it was +23% higher. to that of early 2022.

Ethereum (ETH)

It is no coincidence that something very similar happened to Ethereum.

The price fell from $3,300 to under $1,200, excluding momentary spikes, with a 64% decline. At the same time, however, the number of on-chain addresses with at least 1 ETH increased by 21%.

The fact that this increase was slightly less than that of Bitcoin may be because BTC is likely seen as a store of value by slightly more people than those who think ETH is as well.

It should be noted, however, that with the move to PoS, ETH has become a currency with a deflationary supply, at least for the time being, so the distance between it and BTC in this context has increased a lot. shrunk lately.

The accumulation phase in relation to the price of Bitcoin and Ethereum

According to CoinGecko’s report, by Lim Yu Qian, the dynamic just described could be explained assuming that crypto investors took advantage of low prices to either accumulate or hold. It would be a sign of confidence in the future of the industry.

Moreover, the increase in addresses would also indicate the entry of more participants, or greater adoption of cryptocurrencies, into this market.

In fact, during last year’s bear market, and especially around the time of the biggest price declines, there were clear signs that the whales were piling up.

It is possible that on the one hand there were those who, out of fear, sold as quickly as possible, contenting themselves with selling at a bargain price, while on the other hand there were those who did not let their emotions take over and rationally thought that maybe such low prices were a tempting opportunity to hoard.

There should therefore have been a huge transfer of funds from the more emotional, generally less experienced investors and speculators with less capital to invest, to the more rational and experienced investors and speculators, generally with large capitals to manage. judiciously and reasonably. .

If things had happened exactly this way, one could easily explain the increase in addresses with at least 0.1 BTC or 1 ETH. It would therefore have been on the one hand a phase of unloading, due to fear, and on the other hand a phase of accumulation due to a reasoning which considers the risk as a danger but also as an opportunity.

In fact, CoinGecko’s own report points out that the strongest growth in the number of such addresses occurred in the fourth quarter, which is when Bitcoin in particular hit its lowest price levels in 2022.

Although there is no certainty, it was possible to imagine that at some point the descent would stop, and when the collapse due to the bankruptcy of FTX stopped with a -26%, it was possible to imagine that the bottom was near.

For example, the implosion of the Terra/Luna ecosystem in May caused the price of Bitcoin to collapse by 35%, while the failure of Celsius in June caused it to collapse another 43%.

Since FTX played a much larger role in the Bitcoin ecosystem than Terra (which had very little to do with Bitcoin) and Celsius (which had far fewer users than FTX), this -26% had a vague appearance of only a half-collapse, so much so that many were expecting a drop to $10,000, $12,000 or at least $14,000 at that point.

In other words, some analyzed the situation well and interpreted it as a possible buying opportunity, while many simply panicked and sold.

[ad_2]