Ethereum Flowing Out of Exchanges and Into Smart Contracts

In letter

  • ETH, which sits in smart contracts, rose from 11% in June to over 16% currently.
  • The exchange of ether increased from 19,000 in August to below 16,000 today.
  • Smart contract usage hit a plateau in October but remains near its all-time high.

The Ethereum ecosystem in 2020 witnessed one DeFi Explosion that helped drive the price of ETH up while also bringing potentially profitable new tokens to market. But now traders have to ask: what to do with all of the ETH if their price goes up and the DeFi protocols come back to life?

Your answer: just keep doing the same thing.

According to Glassnode, the amount of Ethereum held on exchanges has declined since late July 2020. Meanwhile, the percentage of Ethereum that is deposited in exchanges has decreased smart contractswhere it can potentially spark interest in DeFi logs has been growing since June.

Within a few months, the supply of ETH in smart contracts rose from 11% to 17%, while ETH on exchanges rose from 19,000 ETH to 15,500.

ETH in exchange for ETH in intelligent contracts. Image: Glassnode, compiled by Anthony Sassano

So until last month. October showed slight deviations: while the ETH continued to leave the centralized exchanges, the number of deposits in smart contracts remained relatively stable; DeFi stopped growing.

Pedro February, the founder of Bityond and researcher at Quantum Economics, said Decrypt“What I suspect is the same thing that happens to Bitcoin: Essentially, we are seeing more and more coins being withdrawn from being exchanged for private purses.”

He continued, “Most likely these companies have no interest in selling in the short term.”

This, of course, has an impact on the markets as a decrease in supply can lead to price increases as there is more competition among buyers. This is what chain analysis is reported Happened to Bitcoin today.

But it’s not quite to the same extent. This is because, although ETH’s share of smart contracts has increased, it is still approaching an all-time high. According to Chainalysis, “Ethereum … is becoming more fluid and moving in wallets that are not only frequently traded but also quite new.”

A large part of ETH is in young purses. Image: Chain analysis

In the past eight months, “at the time of the acquisition, over 8 million ETH had moved into liquid purses that were less than a month old”.

Of course, retailers may only allow their ETH to flow into the DeFi Smart contract in the long term. Regardless of the price of Ether reaching a level not seen since 2018, holders can take a break as long as the price continues to rise.

Disclaimer of liability

The views and opinions expressed by the author are for informational purposes only and do not constitute financial, investment or other advice.