The Race to Catch Ethereum
Over the past couple of weeks, the markets have been strangely calmed for what we are used to seeing in crypto. Although, there are some outliers like the DeFi tokens run last week or some altcoins that have obtained impressive gains lately. In general, for the past month, main cryptocurrencies like Bitcoin and Ethereum have been experiencing light spot trading levels within a tight range of prices as volatility continues to decline. Multiple issues have been identified by analysts and traders trying to explain this sudden decline in activity. It can be associated with renewed COVID fears or mounting trade tensions but we are unable to know for sure. Numerous articles, interviews, and podcasts are already addressing this topic with different points of view.
For today’s article, the idea is to pass through the macroeconomic environment and its relatively slow trading activity and go deeper into the analysis of two different blockchain protocols that are racing for the spot as the reigning protocol in the space. The intention is to better understand their performance and status from a data perspective using Intotheblock’s intelligence platform and evaluate what the numbers are actually telling. I am going to focus on Ethereum which is currently the undisputed market leader and Cardano as the upcoming challenger.
Ethereum continues to be the leading protocol.
Since its launch back in 2013, Ethereum has captured the attention of traders and analysts all over the world as its ecosystem remains healthy and vibrant. They were the first protocol to shift its focus away from cryptocurrencies as financial tools towards a more utilitarian purpose while running a decentralized organization. Although experiencing some delays, the market has high expectations with the network upgrade as ETH 2.0 approaches with a transition from proof-of-work to proof-of-stake requiring miners to stake at least 32 ETH to operate.
Despite the current state of the market, Ether has performed quite well during the first half of the year with a YTD return of 76.42%. The market dynamics of Ethereum have been strongly positive so far. As of today (June 3rd) ETH is trading at $227.68 USD with a market capitalization of $25.40 Billion dollars with a strong daily trading volume and consolidated as the second most important cryptocurrency after Bitcoin. Lately, we have seen some failures to break the $250 levels that could transition into a bull market. For this matter, an increase in trade volume is needed.
In terms of price movements, we must also see that correlation between Bitcoin and Ether recently climbed to the highest levels (0.95) in the past month indicating that both assets have been moving in the same direction. Also, on July 1st, Ether’s volatility reached its 30-day low point at 33.89%.
An important factor driving attention towards Ethereum lately is the impressive traction that the DeFi movement is gaining over the market. A great number of DeFi projects are based on the Ethereum Blockchain, being MakerDAO the most relevant to mention as they dominate the crypto lending markets. Consequently, one of the main reasons for the surge in interest in decentralized finance is the high yields they have been producing. Currently, almost one in every 37 Ether is locked in a DeFi protocol, a factor that is driving the growth in terms of activity on the Ethereum network. As we can see in the chart below, IntoTheBlock’s address analysis shows how the number of Ethereum active addresses have been growing sustainably during the year.
To complement the above mentioned, recently the number of Ethereum transactions reached a level not seen since January 2018, it surpassed 1 million transactions, achieving a high of 1.09 million transactions on June 23.
Another element that is gaining strong momentum for Ethereum is the development of its Derivatives market. Alongside with Bitcoin, we have seen as the volumes continue to grow with more traders and investors entering the market. An important takeaway is that in June, OKEx rolled out option contracts for ETH to compete with Deribit. Options are derivative contracts that give the buyer the right, but not the obligation, to buy or sell the underlying asset at a predetermined price on or before a specific date. For example, buying longer-term call options can be seen as an opportunity to benefit from the potential upside of Ethereum 2.0.
Derivatives are certainly a hot topic right now and one of the fastest-growing segments in crypto. Specifically for Ethereum, we can see in the graph below the total daily volume traded has remained steady over $1 Billion over the different exchanges dominating the space.
To end the Ethereum dive, it is worth noting that the number of HODLER’s of ETH tokens have been continuously increasing on a monthly basis during the last year. This week alone, the number of addresses holding Ethereum for more than 1 year reached 23.69 Million with a volume of 61.64 million ETH, while the average time that tokens are held by these addresses is 2.6 years.
Undoubtedly, Ethereum has a strong reputation in the market and a long way to go towards achieving its goals. As we keep an eye on its upcoming network upgrade, let’s move towards analyzing Cardano which is an upcoming protocol working hard towards making a threat to Ethereum dominance.
Big expectations on Cardano’s upgrade.
Cardano is a proof-of-stake blockchain network that has a dual-layer solution, with a unit of account and a control layer that governs the use of smart contracts, recognizes identity, and maintains a degree of separation from the currency it supports. They stand out among other blockchain projects for exclusively using academically peer-reviewed open-source code to provide a smooth-running network that programmers and developers can build applications on.
Cardano has performed impressively well during the first half of the year with a YTD return of 180%. At the time of writing, ADA token is trading at $0.0938 USD with a market capitalization of $2,433 Billion dollars and a steady trading volume that has consolidated well in the top 10 ranking of most important cryptocurrencies after Bitcoin. ADA has now raced up to fresh yearly highs, reaching 0.0928 on July 2nd, a price we haven’t seen since June of 2019, surging more than 12% in just a couple of hours.
The impressive price rally is likely due to optimism ahead of the much-anticipated release of the Shelly upgrade. On June 30, Cardano released the “Shelley Code”, as previously announced on their roadmap. The process should be fully completed in about 3 weeks after which the network will undergo a hard fork. It basically consists of an incentivized testnet to reward the holders for delegating their Stake. This promotes the staking of the users inside the network as they become eligible to earn rewards that will be transferred to one of the Cardano wallets, known as Daedalus and Yoroi.
In terms of price activity, Cardano’s token is one of the few that has managed to appreciate during the last week. It is interesting to see how ADA moves aggressively apart from Bitcoin reaching a 30-Day Low correlation point of (0.1) on July 3rd while its volatility remains somehow steady.
Cardano Holders must certainly be happy by the recent price surge. There are signs of strong recovery for ADA holders as almost 70% of them are In The Money right now.
IntoTheBlocks’s In-Out of the Money indicator reveals a holistic view of how this asset is doing in two different perspectives, by addresses, and by volume. As the price went from $0.033 USD in early January towards $0.093 USD as of today, we can see how an important number of holders started recovering and making money on their investment. At the beginning of the year, almost 85% of ADA holders were underwater. An incredible way to change things in just half a year!
Similar to what is happening on Ethereum, token holders are keeping their investment for a longer period of time. We can see that ADA Hodlers are consistently increasing every month. This week, the number of addresses reached 213.95 thousand with a volume of 7.78 billion ADA. The average time that tokens are held by these addresses is 2 years.
Finally, in terms of adoption and traction, we can see a spike in the number the Total Addresses of ADA with a positive Balance. This is another metric that has increased considerably during the past couple of months as we can see in the image below.
As the Cardano team aims to become a key player in the emerging supply chain and DeFi sectors, we must be aware of the results of the much-anticipated network upgrade and see how they position themselves for the near future, but their prospects and recent state seems very positive.
Something is sure, this duel is just at the beginning. There are super interesting things happening in the market, so let’s remain attentive to which protocol will really face a threat to Ethereum. Certainly, there are very good projects out there, which are characterized by a solid team and a sustainable business case. From the standpoint of IntoTheBlock, our intention is to provide valuable data points that show different views and perspectives to make better-informed investment decisions.
