As the total market cap of crypto reaches a new paradigm, bitcoin and ethereum balances on exchanges continue to dwindle, but for different reasons.
Let’s dig in.
Crypto is booming, so much so that last weekend (6–7 Feb) saw the total market capitalisation of the industry surge to fresh all time highs as a swell of new investment tools became more widely known to bitcoin and ethereum investors.
In just three days, markets added $500 million to their growing coffers, reaching a total market cap of $1.23 trillion, per data from CoinGecko.
By and large, the majority of growth came through bitcoin, which tapped $41,000 before retreating to the $38,000 level. At the time of publishing, bitcoin was up 1.5% in 24 hours and is currently trading above $47,000.
As it happens, both bitcoin and ethereum balances on centralised exchanges are still trending lower — i.e., investors are taking their crypto off exchanges and into private wallets.
In the case of ethereum, holders can trade on DEXes such as Uniswap from their personal wallets. Technically proficient etherians are also locking-up funds in ETH 2.0 in order to earn staking rewards.
On the other hand, the reasoning behind bitcoin’s continued exchange balance down-trend is due to its store of value properties against persistent inflationary pressures — which show no signs of abating.
The bifurcation between the two assets could become clearer once the industry matures and investors begin to value digital assets differently.
Presently, crypto is seen as one giant investment opportunity. However, now that bitcoin developers are dabbling in their own version of decentralised finance, there could be increased friction between crypto narratives.
Such conversations are months, if not years, in advance of any kind of industry maturity.
Ethereum February pump to go parabolic?
Ethereum is in price discovery mode.
Over the weekend (6–7 Feb), ETH dipped below $1,500 for a few brief seconds before climbing higher — confirming the all-time-high breakout in the process. In a prior range, the 20-daily ema and the upwards sloping channel acted as support before the trend resumed.
Now that crypto inflows are at all time highs, expansion (and subsequent volatility) is likely — bearing in mind that ethereum printed fresh all time highs on Feb 2nd.
If its performance is anything like bitcoin’s, then a $3,000 ETH is well in the cards.
ETH/BTC grinds closer to a macro pivot
Meanwhile, the ETH/BTC pair shows room for expansion. After a 3-year bear market ethereum printed a higher local high, as you can see on the chart below.
The longer the accumulation the greater the breakout and this technical truism appears to be playing out.
For all its faults and systemic risks, ethereum has taken up the mantle of innovating financial markets. Every week, the total value locked (TVL) in DeFi multiplies by a couple of billion.
In fact, at the time of publishing, the TVL is pushing $35 billion as lending protocols, Dexes, and derivatives gain momentum, per data on defipulse.
The question is: can the Ethereum network sustain further stress tests as transaction fees begin to teeter to August 2020 levels again?
We’ll find out soon enough.
Catch you next time.