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September 11, 2022

On-chain data shows Ethereum being utilized as a value storage

On-chain data indicates that HODLing is the predominant activity on the Ethereum network as the merging draws near. Coins owned by Ethereum investors are evolving to reveal a greater proportion of hodlers who are averse to selling.

Compared to Bitcoin, where 80% of HODLers have held for the same time period, just slightly less than 60% of investors in the Ethereum ecosystem have held for longer.

However, we are now seeing a rise among ETH 7-year holders (dark blue). The first 7-year holders started to emerge on July 28 and currently possess more than 2% of the supply.

Coins that haven’t moved in 7 years are probably genesis coins that have never moved, given that Ethereum mined its first block in July 2015. As HODLers who joined the ecosystem during the 2017 bull run begin to emerge, it is anticipated that the number of 7-year HODLers will keep increasing over time.

Ethereum is less often referred to be a store of value than Bitcoin. On-chain data, however, indicates that 2% of Ethereum owners think it may be. This argument gains support since ETH could experience deflation after The Merge, depending on how the network behaves.

Ethereum may experience deflation of 4%, which is about 6% lower than Bitcoin’s inherent inflation rate of 1.7%. However, Ethereum has widespread use, thus a shortage of ETH owing to investor holdings might have an effect on the network’s functionality.

A tactic used to promote spending is inflation. There won’t be much of a need to conduct transactions on the network if it goes into deflation.

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Additionally, by mid-2020, there were about 32 million ETH on exchanges. However, barely 20 million ETH remained two years later. To comprehend supply/demand dynamics, it is important to understand long-term trends such as the number of long-term HODLers, inflation rates, and supply on exchanges.