From a medium-term perspective, it’s been an extremely strong year for Ethereum.
From the capitulation lows of approximately $85 seen in March of this year, the largest altcoin has gained around 200%. And since the start of the year, ETH’s gains are approaching 100%.
But stepping back, Ethereum is actually a poor performer on a macro scale. After peaking at an all-time high around $1,450 at the start of January, the cryptocurrency was thrust into a macro bear market. At the current price of approximately $240, the asset is down by 83% from its all-time high.
The thing is, Ethereum’s fundamentals are arguably stronger than ever. One metric that shows this is the value of all ERC-20 tokens in circulation, which recently passed the market capitalization of all Ethereum in circulation. Another metric that corroborates this is the number of daily confirmed transactions, which has floated around one million for the past two weeks, nearing all-time high levels.
The cryptocurrency’s inability to outperform, though, might be somewhat explainable.
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There’s a Likely Reason Why Ethereum Is Underperforming
Ethereum’s underperformance may be tied to the fact that demand for the cryptocurrency hasn’t yet caught up to the asset’s inflation/issuance rate, according to a recent comment from crypto analyst Josh Olszewicz.
Olszewicz noted that since January 2018, approximately 18,370,000 ETH has been dumped on the market from miners and ICOs. In comparison, 4,740,000 ETH has been accumulated in DeFi contracts and by Grayscale for the Grayscale Ethereum Trust since the start of 2019.
This is not an extensive list of factors by far but it shows that there has likely been a strong selling undercurrent to the Ethereum market since the all-time highs, which has potentially suppressed prices.
“As impressive as DeFi ETH locked has become, it only recently surpassed ICO treasury selling and is no where near absorbing inflation since 2018… b/c im looking at the $ETH price chart with the $ETH the on-chain data and there’s a massive divergence here.”
why hasnt ETH mooned yet? maybe buying demand/pressure hasn't caught up with inflation
Since Jan 2018:
ETH created to date = 15M ETH
ICO treasury decline to date = 3.37M ETH
Total = 18.37M ETHSince 2019:
in DeFi = 3.50M ETH
in ETHE trust = 1.74M ETH
Total = 4.74M ETH pic.twitter.com/mkyI74XLzz— #333kByJuly2025 (@CarpeNoctom) July 15, 2020
What Will Trigger an ETH Bull Run?
With these factors affecting Ethereum’s supply-demand dynamics, that raises the question of what will drive an actual Ethereum bull run.
According to many, the launch of Ethereum 2.0 could change the cryptocurrency’s tokenomics in a way that promotes growth. Along with boosting the usability of the network, the upgrade will implement a technology known as staking into Ethereum.
Ignoring the technological benefits that staking provides, this technology will incentivize the mass accumulation of the cryptocurrency while also promoting users to lock up their holdings.
Chris Burniske, a partner at Placeholder Capital, believes that Ethereum’s upcoming bull run could be catalyzed by its network value and “strong on-chain economies”:
“Meanwhile, to the mainstream $ETH will be the new kid on the block — expect a frenzy to go with that realization. Given $ETH’s outperformance of $BTC over its lifetime (chart below again), not to mention smaller network value and strong on-chain economies, I see every reason for $ETHBTC to surpass ATHs.”
Meanwhile, to the mainstream $ETH will be the new kid on the block — expect a frenzy to go with that realization.
— Chris Burniske (@cburniske) June 14, 2020
How far the cryptocurrency rallies, though, remains to be seen.
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Featured Image from DepositPhotos Charts from TradingView.com Price tags: ethusd, ethbtc Why Is ETH Down 80% From $1,400 All-Time High? Analyst Explains
