Coin Metrics' State of the Network: Issue 101

Tuesday, May 4th, 2021

Get the best data-driven crypto insights and analysis every week:

Read our latest in-depth research report here: The Crypto Futures Data Primer.

Weekly Research Focus

Ethereum’s Institutional Evolution 

By Nate Maddrey and the Coin Metrics Team

Ether (ETH) once again reached new all-time highs this past week. Price climbed to over $3,300 after dropping below $2,100 less than two weeks ago. But although ETH is breaking new highs in terms of USD, it’s still well below its all-time highs when denominated in BTC. 

Last month Bitcoin (BTC) reached about 3.2x of its peak price during the previous cycle in December, 2017. But so far in 2021 ETH has only reached about 2.4x of its previous all-time high set in January, 2018.

Source: Coin Metrics Network Data Charts

A lot of ETH’s 2021 success has been driven by retail investors. The NFT explosion has helped bring in new users and mainstream attention for Ethereum. And decentralized finance (DeFi) total value locked continues to reach new heights as more investors enter the ecosystem. 

On-chain data provides some evidence for ETH’s retail growth. ETH addresses holding relatively small amounts (between 0.01 and 1 ETH)  have increased by about 3.8M since the start of the year, to over 13.6M. For context, on May 4th, 2018 there was a total of 3.8M addresses holding 0.01 - 1 ETH. 

Source: Coin Metrics Network Data Charts

ETH’s 2017/2018 cycle was also largely driven by retail investors. But there’s one big difference between the previous cycle and today: institutions. Institutional investors started entering crypto at an unprecedented rate in 2020, and have pushed BTC prices to new all-time highs in 2021.

Institutions Incoming 

While institutional investors have been pouring into BTC they have been slower to adopt ETH. But there are signs that ETH is finally starting to gain some momentum with institutions going into the summer.

Chicago Mercantile Exchange (CME) futures are one of the primary ways that institutional investors can get exposure to crypto. Unlike most crypto exchanges, CME is regulated in the US and has a long history with traditional derivatives, which makes it a trusted venue for institutions. Coin Metrics introduced CME market data coverage as part of our recent Market Data Feed updates. For an introduction to crypto futures data see our Crypto Futures Data Primer research report. 

CME first introduced BTC futures in December, 2017. But they just added ETH futures in February, 2021. While CME ETH futures trading volume was relatively low in March, it surged in April, reaching a daily high of over $500M. 

Source: Coin Metrics Market Data

Although CME ETH futures trading volume is growing it's still significantly lower than BTC. CME BTC futures have hit a daily high of over $6B so far in 2021. But BTC volume peaked in late February. ETH volume just started to hit new highs in April, and appears to still be ramping up. 

Source: Coin Metrics Market Data

Although institutions may still be wading into ETH, ETH should soon get significantly more attractive to institutional investors.

Improving Economics 

Up until now, some institutional investors have had concerns about Ethereum’s economic policies and relatively high inflation rate compared to Bitcoin. But some of those concerns will soon start to get addressed with the upcoming release of Ethereum Improvement Proposal (EIP) 1559.  

EIP-1559 is set for release in July as part of Ethereum’s upcoming London hard fork. In addition to improving ETH gas UX, EIP-1559 will burn a portion of ETH transaction fees. This will permanently remove a portion of supply from circulation and decrease the daily net issuance of ETH. For an overview of how EIP-1559 will change Ethereum’s gas fee mechanism check out The Ethereum Gas Report

For example, the following chart shows what the net daily issuance of ETH would look like if EIP-1559 results in 75% of fees being burned. This is just a historical estimate calculated by subtracting 75% of daily fees from the amount of ETH issued daily - there’s no way to know exactly what percent of fees will be burned compared to what percent will go towards tips once EIP-1559 goes live. But it shows that issuance will likely be reduced by a significant amount, and may even turn negative during periods of extremely high fees. 

Source: Coin Metrics Network Data Charts

This would lead to an estimated annual inflation rate (30-day average) of between 1-2%. Again, this is just an estimation, and it will fluctuate depending on the amount of daily transaction fees as well as the percent that is burned. But overall ETH’s inflation rate should drop significantly. 

Source: Coin Metrics Network Data Charts

In addition to EIP-1559, other improvements are in the works. The introduction of Ethereum 2.0 staking will effectively turn ETH into a yield bearing asset. There’s already over 4.1M ETH locked in the Ethereum 2.0 staking contract. And with Coinbase and others starting to introduce Ethereum staking products the number of ETH staked will only increase.  

Layer 2 scalability solutions are also already being rolled out. AAVE recently introduced an integration with Polygon (MATIC) which already has over $2B of deposits. And solutions including Immutable X are helping NFT platforms scale, which should help further attract retail investors. 

If retail users continue to adopt ETH and more institutions start entering, ETH could be in for a big second half of 2021. To explore the data used in this piece and our other on-chain metrics check out our free charting tool, formula builder, correlation tool, and mobile apps.

Network Data Insights

Summary Metrics

Source: Coin Metrics Network Data Pro

ETH market cap increased by 19.7% week-over-week as price topped $3K for the first time ever. But ETH active addresses declined a little after reaching a new all-time high of over 900K the previous week.

BTC’s market cap remained over $1T after temporarily dropping back into the billions at the end of April. Hash rate grew 8% week-over-week and has recovered after dropping in mid-April due to blackouts in Northwest China. 

Network Highlights

Ethereum transaction fees have soared to new all-time highs in 2021 with the continued rise of DeFi and unprecedented demand for block space. But in May the average Ethereum gas price has dropped down to its lowest level since December 2020, even though network usage remains high.

On April 22nd, Ethereum miners raised the gas limit to about 15M per block. This means that more space is available per block, which has helped push down the average gas price. 

Source: Coin Metrics Network Data Pro

Average transactions per block reached 246 on April 22nd, which is the highest it's been since January 2018. Since then the average has stayed above 213, which is equal to the previous high over the last two years. 

Source: Coin Metrics Network Data Pro

The average transaction fee paid in terms of USD has also dropped to below $10 despite ETH price hitting new all-time highs. 

Source: Coin Metrics Network Data Pro

Coin Metrics Updates

This week’s updates from the Coin Metrics team:

  • Coin Metrics is pleased to announce the version 2.3 release of our CM Market Data Feed. This release significantly expands the exchanges in our coverage universe including data from CME and Bybit, introduces options data, and contains an upgrade to our candles data. 

  • Check out our new market-data focused newsletter State of the Market, featuring weekly updates on market conditions.

As always, if you have any feedback or requests please let us know here.

Subscribe and Past Issues

Coin Metrics’ State of the Network, is an unbiased, weekly view of the crypto market informed by our own network (on-chain) and market data.

If you'd like to get State of the Network in your inbox, please subscribe here. You can see previous issues of State of the Network here.

Coin Metrics' State of the Network: Issue 100

Tuesday, April 27th, 2021

Get the best data-driven crypto insights and analysis every week:

Read our latest in-depth research report here: The Crypto Futures Data Primer.

State of the Network’s 100 Crypto Data Insights

State of the Network just turned 100! In a special edition to celebrate the release of the 100th issue of State of the Network we’ve put together 100 crypto data insights. The insights include a mix of on-chain data and market data, all sourced from our in-house data products

To see highlights from some of our most popular past issues check out The Best of State of The Network 2020. And to explore some of the data used in this piece and our other on-chain metrics check out our free charting tool, formula builder, correlation tool, and mobile apps.

  1. $100 invested in Bitcoin (BTC) 100 days ago would be worth $135 today.

  2. $100 invested in Ether (ETH) 100 days ago would be worth $186 today.

  3. $100 invested in Uniswap (UNI) 100 days ago would be worth $401 today.

  4. $100 invested in Dogecoin (DOGE) 100 days ago would be worth $2,742 today.

Source: Coin Metrics Network Data Charts

  1. BTC has averaged 1.12M daily active addresses over the last 100 days.

  2. ETH has averaged 610.74K daily active addresses over the last 100 days.

  3. On April 14th, 2021 BTC daily active addresses reached a new all-time high of 1,366,494. 

  4. The all-time high prior to 2021 was 1,290,363 on December 14th, 2017.

  5. Litecoin (LTC) has had more active addresses over the last 100 days (24.39M) than UNI, AAVE, Compound (COMP), MakerDAO (MKR), and Synthetix (SNX) combined (1.41M).

  6. Cardano (ADA) had more active addresses from April 22nd-25th, 2021 (332,151) than the entire month of October 2020 (254,995).

  7. Over its 11 year history there have been over 636M BTC transactions.

  8. Over $4.6T has been settled on the Bitcoin network.

  9. BTC's market cap is about 70% of silver's market cap, and about 9% of gold's (source for non-crypto market caps).

  10. Uniswap's (UNI) market cap ($33.65B) is currently less than half of Coinbase's (COIN) market cap ($77.62B).

  11. UNI, AAVE, COMP, MKR, and SNX's combined market caps ($51.66B) are about 19% of ETH's market cap ($265.99B).

  12. BTC has had an average transaction size of $30.36K over the last 100 days.

  13. ETH has had an average transaction size of $15.66K over the last 100 days.

  14. BTC has had an average transaction fee of $20.68 over the last 100 days.

  15. ETH has had an average transaction fee of $16.68 over the last 100 days.

  16. BTC average transaction fee reached $60.95 on April 20th, its highest ever.

  17. ETH's all-time high mean transaction fee was $38.03 on Feb 23rd, 2021.

Source: Coin Metrics Network Data Charts

  1. Ethereum's average gas price since the start of 2021 has been 147 GWEI. 

  2. The average gas price on April 25th was 54 GWEI, the lowest daily average so far in 2021.

  3. Ethereum's all-time high average gas price was 535 GWEI on September 17th, 2020, following the launch of UNI.

  4. Bitcoin has generated over $2B USD worth of transaction fees .

  5. Ethereum has generated over $3.17B USD worth of transaction fees.

  6. Ethereum has generated over $2.3B USD worth of transaction fees since the start of 2021.

  7. Litecoin (LTC), Bitcoin Cash (BCH), Ethereum Classic (ETC), Cardano (ADA), Dogecoin (DOGE), Ripple (XRP), and Bitcoin SV (BSV) have generated a combined total of $13.60M of transaction fees.

Source: Coin Metrics Network Data Charts

  1. BTC's current supply is 18.69M. 

  2. ETH's current supply is 115.62M.

  3. DOGE's current supply is 129.21B. 

  4. An average of about 13,525.2 new ETH have been issued a day throughout 2021.

  5. An average of about 909.4 new bitcoins have been issued a day throughout 2021.

  6. BTC has had an average annual inflation of 1.78% so far in 2021.

  7. ETH has had an average annual inflation of 4.21% so far in 2021.

  8. According to Coin Metrics’ free float methodology, about 14.57M BTC are considered to be part of free float, liquid supply, which is about 78% of total BTC supply.

  9. About 111.37M ETH is considered free float, 96% of total supply.

  10. About 36.22B XRP is considered free float, 36% of total supply.

  11. One BTC was $7,427 one year ago today.

  12. One ETH was $188 one year ago today.

  13. About 55.2% of BTC has been held for at least a year. 

  14. About 22.1% of BTC has been held for at least 5 years.

Source: Coin Metrics Network Data Pro

  1. About 11.2% of BTC has been held for at least 10 years. 

  2. BTC's velocity (7-day moving average) has stayed relatively flat since the start of the year, increasing from 4.73 to 4.76.

  3. ETH's velocity (7-day moving average) has increased by about  31% since the start of the year, growing from 9.89 to 13.00.

  4. BTC has had an average of $14.51B of trusted trading volume over the last 100 days.

  5. ETH has had an average of $6.10B of trusted trading volume over the last 100 days.

  6. XRP has had an average of $2.41B of trusted trading volume over the last 100 days.

  7. ADA has had an average of $1.31B of trusted trading volume over the last 100 days.

  8. DOGE has had an average of $2.29B of trusted trading volume over the last 100 days.

  9. BTC's all-time high daily trusted trading volume was $33.58B on February 23rd, 2021.

  10. DOGE had over $40B of trusted trading volume on April 16th, 2021, topping BTC's all-time high.

Source: Coin Metrics Network Data Charts

  1. Over the last 100 days, the average daily BTC inflow to major exchanges (excluding Coinbase) was about $1.41B.

  2. The average daily BTC outflow from major exchanges (excluding Coinbase) over the last 100 days was $1.46B. 

  3. There are 9.14M addresses holding at least 0.01 BTC.

  4. There are 816.8K addresses holding at least 1 BTC.

  5. There are 2,242 addresses holding at least 1K BTC. 

  6. There are over 14.86M addresses that hold at least 0.01 ETH.

  7. There are over 1.23M addresses that hold at least 1 ETH.

  8. There are 1,308 addresses that hold at least 10K ETH.

  9. The top 1% of BTC addresses (including exchanges) hold about 91% of total supply.

  10. The top 1% of ETH addresses (including exchanges) hold about 97% of total supply.

  11. Addresses holding less than 1 BTC collectively hold about 5% of total BTC supply.

  12. There's currently 156.94K wrapped BTC (WBTC) on Ethereum.

  13. It took about 2.5 years for stablecoin supply to grow from 1B to 10B. It took less than a year to grow from 10B to over 75B.

Source: Coin Metrics Network Data Charts

  1. Total stablecoin supply is on pace to pass 100B before the end of 2021.

  2. The amount of Tether on Ethereum has increased from 13.54B to 24.42B since the start of 2021.

  3. The amount of Tether on Tron has increased from 6.8B to 26B since the start of 2021.

  4. USDC supply has increased from 4.1B to 13.7B since the start of 2021.

  5. DAI supply (ERC-20) has increased from 1.2B to 3.5B since the start of 2021.

  6. There are over 5.48M addresses holding at least $1 worth of stablecoins, up from 1.25M a year ago.

  7. There are over 2.45M addresses holding at least $100 worth of stablecoins, up from 633.95K a year ago.

Source: Coin Metrics Network Data Charts

  1. There are 5,258 addresses holding at least $1M worth of stablecoins, up from 766 a year ago.

  2. 4,035 addresses hold at least $1M of Tether, 894 hold at least $1M of USDC, and 219 hold at least $1M of DAI.

  3. Bitcoin miners have earned a total of $26.75B.

  4. Ethereum miners have earned a total of $13.71B.

  5. Bitcoin Cash miners have earned a total of $1.24B.

  6. Ethereum Classic miners have earned a total of $408.16M .

  7. There are 318.50K ERC-20 smart contracts launched on Ethereum.

  8. There are 20.18K ERC-721 smart contracts launched on Ethereum.

  9. There's currently 25.83M ETH held by smart contracts, about 22% of total supply.

  10. An average of 3.96M ETH has been transferred by smart contracts per day over the last 100 days.

  11. BTC hash rate has grown by 20% since the start of 2021.

  12. ETH hash rate has grown by 89% since the start of 2021.

  13. Bitcoin accounts for about 98% of the total combined hash rate generated by miners of Bitcoin, Bitcoin Cash, and Bitcoin SV.

Source: Coin Metrics Network Data Charts

  1. Bitcoin miners collectively hold 4.57M BTC, about 25% of total supply.

  2. About 27.45% of Bitcoin hash rate is contributed by Antminer S9 hardware.

  3. Over the last 100 days, Bitcoin has had an average of 601.77 seconds between new blocks. 

  4. Over the same period Ethereum has had an average of 13.30 seconds between new blocks. 

  5. BTC perpetual futures open interest hit an all-time high of  over $3.8B on Binance in April, 2021.

  6. BTC perpetual futures funding rate has averaged 50.85 APR over the course of 2021.

  7. An all-time high of over $2B worth of BTC longs were liquidated on April 18th, 2021.

  8. An all-time high of over $500M worth of BTC shorts were liquidated on February 8th, 2021.

  9. About 18% of BTC transactions have been sent to exchanges over the last 100 days (excluding Coinbase).

  10. BTC transactions to exchanges peaked at 56% of total transactions on January 4th, 2018.

  11. At least 1.49M BTC is currently held on major centralized exchanges (excluding Coinbase).

  12. The amount of BTC held on centralized exchanges peaked at 1.69M on March 12th, 2020.

Source: Coin Metrics Network Data Charts

  1. Bitcoin market value to realized value ratio (MVRV) has dropped below 1.0 only six times over the last two years.

  2. If you had bought $100 of BTC each of those six days ($600 total investment) it would be worth over $5,600 today.

  3. The last time you could buy 1 BTC for less than $100 was August 18th, 2013.

Coin Metrics Updates

This week’s updates from the Coin Metrics team:

  • Check out our new market-data focused newsletter State of the Market, featuring weekly updates on market conditions.

  • We’re excited to announce the new Coin Metrics mobile app. View real-time cryptoasset pricing and relevant on-chain data in a single app!  Download for free here: https://coinmetrics.io/mobile-app/

As always, if you have any feedback or requests please let us know here.

Subscribe and Past Issues

Coin Metrics’ State of the Network, is an unbiased, weekly view of the crypto market informed by our own network (on-chain) and market data.

If you'd like to get State of the Network in your inbox, please subscribe here. You can see previous issues of State of the Network here.

Check out the Coin Metrics Blog for more in depth research and analysis.

Coin Metrics' State of the Network: Issue 99

Tuesday, April 20th, 2021

Get the best data-driven crypto insights and analysis every week:

Read our latest in-depth research report here: The Crypto Futures Data Primer.

Weekly Research Focus

Introducing The Crypto Futures Data Primer

By Nate Maddrey and the Coin Metrics Team

After topping $63K last week bitcoin (BTC) came crashing back down to earth this weekend. Following Coinbase’s IPO on Wednesday market sentiment was at a high amidst a rush of new media coverage. But by the end of the week narratives began to shift. 

On Friday reports began to surface of regional blackouts in Northwest China causing mining operations to go offline and leading to a drop in Bitcoin’s hash rate. Bitcoin’s estimated hash rate indeed dropped on Friday to its lowest level since November 2020. But it has already started to rebound, and should continue to recover as miners come back online or relocate to other regions. 

Although the drop in hash rate may have contributed to an initial panic selloff, BTC’s drop was likely largely due to a cascade of liquidations on overleveraged BTC futures positions. Following the Coinbase IPO, BTC perpetual futures open interest surged to its highest levels ever. Open interest is a measurement of the total number of active futures contracts. Increasing open interest indicates that more contracts are being opened and additional money is coming into the market. 

Open interest can also serve as a proxy for measuring leverage. Leverage can be used to increase the potential returns of a futures contract. Using leverage effectively allows a trader to wager larger amounts of capital than they currently have in the account. But using leverage also amplifies risk.  

If there’s a relatively high amount of open interest there’s a good chance there’s a high amount of leverage in the futures market, as contracts are often opened using leverage. As large liquidations occur, open interest can quickly start to decrease as the market deleverages.   

After opening a leveraged futures contract, the trader must keep a certain level of maintenance margin at the risk of being liquidated and losing their investment. Price movements can cause a trader to fall below margin requirements and result in liquidation. Highly leveraged trades typically require high levels of maintenance margin, which means relatively small dips in price can lead to getting liquidated.

April 17th had the highest amount of BTC perpetual futures long liquidations so far in 2021. As price dropped, overleveraged positions began to get liquidated. Liquidations tend to be self-reinforcing - as long positions are liquidated and sold spot price drops, leading to more liquidations. This can lead to liquidation cascades, which can sometimes cause large, sudden movements in spot price. Liquidation cascades can be painful in the short-term, but are generally healthy in the long-term as leverage levels get reset. 

Derivatives like futures can get endlessly complex. But even just understanding the fundamentals can give you deeper insight into market dynamics and the forces pulling price in different directions.

To help better understand crypto futures and analyze the data behind them check out our latest in-depth research report: The Crypto Futures Data Primer

Network Data Insights

Summary Metrics

Source: Coin Metrics Network Data Pro

It was an eventful week for both Bitcoin and Ethereum. BTC and ETH market caps both reached new all-time highs over the past week. But Bitcoin hash rate dropped 12.2% week-over-week due to the aforementioned regional blackouts in Northwest China. As block production slowed, BTC fees surged, growing 58.7%. Fees on ETH also surged as traders rushed to react to market volatility and on-chain arbitrage bots kicked in. 

Stablecoins also saw a flurry of activity over the past week, likely due to investors moving to safety amidst the volatility over the weekend. Tether (USDT) and USDC active addresses grew by 13.9% and 33.9%, respectively. On-chain transfer value also surged for both, with USDT growing by 27.6% and USDC by 49.4%. 

Network Highlights

On Friday we released a special research report covering the recent OpenEthereum stoppage

At block number 12,244,000 the Berlin hard fork was activated on Ethereum. Among many changes, it paves the ground for the upcoming London hard fork which will revamp how fees work on Ethereum with the activation of EIP-1559.

294 blocks after the Berlin hard fork activated, the second most popular implementation of the Ethereum protocol, OpenEthereum (ex-Parity) refused to accept new blocks. According to Etherscan, around 16% of all nodes were OpenEthereum (and another 15% Parity).

Immediately, many exchanges and services (including Coin Metrics) either became effectively disconnected from the Ethereum network, or stopped broadcasting transactions out of caution. Around 5 hours after the stoppage, a fix was released by the OpenEthereum team and most of the affected services were back online 9 hours after the incident started.

At first glance, the number of transactions mined on Ethereum was barely, if at all, affected by the sudden disappearance of OpenEthereum nodes.

(approximate stoppage window shown in red)

Source: Coin Metrics Network Data

The best way to quantify the impact of the OpenEthereum stoppage is to look at how many distinct accounts created transactions. It usually hovers around 15,000 unique accounts creating transactions per hour, but dropped to around 9,000 during the outage. Knocking down 16% of nodes dropped the number of active network participants by 40%.

Source: Coin Metrics Network Data

Thankfully, no block was mined that would have split the network in two. Furthermore, there was no decrease in mining activity. This is an indication that miners were not running OpenEthereum.

Source: Coin Metrics Network Data

For more, read the full research report here: Analyzing the On-chain Impact of the OpenEthereum Stoppage.

Coin Metrics Updates

This week’s updates from the Coin Metrics team:

  • Check out our new market-data focused newsletter State of the Market, featuring weekly updates on market conditions.

  • We’re excited to announce the new Coin Metrics mobile app. View real-time cryptoasset pricing and relevant on-chain data in a single app!  Download for free here: https://coinmetrics.io/mobile-app/

As always, if you have any feedback or requests please let us know here.

Subscribe and Past Issues

Coin Metrics’ State of the Network, is an unbiased, weekly view of the crypto market informed by our own network (on-chain) and market data.

If you'd like to get State of the Network in your inbox, please subscribe here. You can see previous issues of State of the Network here.

Check out the Coin Metrics Blog for more in depth research and analysis.

Coin Metrics' State of the Network: Issue 98

Tuesday, April 13th, 2021

Get the best data-driven crypto insights and analysis every week:

And check out our new market-data focused weekly newsletter State of the Market.

Weekly Research Focus

DAI’s Stabilizing Growth 

By Nate Maddrey and the Coin Metrics Team

Stablecoins are a key part of the crypto ecosystem. But despite the name, stablecoins aren’t always stable. On April 3rd Fei Labs launched FEI, a new algorithmic stablecoin. But just a week after launch price dropped as low as $0.75, after over $1B was trapped in the protocol

FEI is far from the first stablecoin to lose its stability. Following the sudden crypto price crash on March 12th 2020, many of the major stablecoins were thrown off their $1 price peg. As investors rushed to safety, demand for stablecoins suddenly increased, sending the price of many stablecoins above $1.

DAI, the decentralized stablecoin launched by MakerDAO, was hit particularly hard during March 2020. Events leading up to the crash led to an extreme ecosystem-wide shortage of DAI which caused DAI’s price to increase to over $1.06 on March 12th. DAI stayed well above its $1 peg for a good part of 2020, especially compared to the other major stablecoins.

Source: Coin Metrics Network Data Charts

That said, DAI’s price has stabilized since Dec. 2020. Over the last four month’s DAI has been noticeably closer to its $1 price peg. DAI’s price stabilization has also corresponded with a steep growth in supply.

Note: Supply figures only include the ERC-20 version of DAI.

Source: Coin Metrics Network Data Charts

DAI’s price first began to stabilize in late September after DAI to USDC-A collateralization ratio was lowered from 110% to 101%. This meant that users could lock 101 USDC to mint 100 DAI, which helped pull DAI’s price down to under $1.01. Shortly after DAI (ERC-20) supply grew to over 600M and price began to stabilize and descend towards the $1 peg. 

Then in late December 2020, MakerDAO developers introduced the Peg Stability Module (PSM) which allows users to swap other stablecoins for DAI at a fixed rate. Initially only a USDC-backed PSM was deployed, but other stablecoins may be added in the future. The USDC-backed PSM allows users to swap 100 USDC for 100 DAI (minus fees), which effectively prevents the peg from moving above $1.001. Since the introduction of the PSM DAI’s price has maintained its tightest peg ever.

These new mechanisms help facilitate arbitrage between stablecoins. Since most major stablecoins are pegged to $1, if price fluctuates too far above or below $1 an arbitrage trader can earn a profit. This ultimately helps align the price of different stablecoins and pull them all towards $1. 

With the growth of DeFi an increasing amount of arbitrage is also occurring on-chain on decentralized exchange (DEXs). Uniswap’s DAI/USDC pair increased in terms of both liquidity and volume starting in September 2020. Liquidity had a huge surge in late December as the PSM was introduced and DAI supply began to take off. 

Uniswap DAI/USDC trading volume also hit all-time highs in late 2020 and the beginning of 2021.

Source: Uniswap.info

DAI’s on-chain transfer value began to grow in summer 2020, with the rise of DeFi. Although not all of this is due to the PSM and arbitrage, this is an additional sign that DAI on-chain activity has increased as price has stabilized.   

Source: Coin Metrics Network Data Charts

Stablecoins are a crucial part of DeFi and crypto at large. DAI plays a key role in many different protocols and applications, and improved DAI stability is a good sign for the stability of the entire ecosystem. As the infrastructure continues to mature, DAI will hopefully continue to mature along with it and stay on its path of consistent stability. 

To explore some of the data used in this piece and our other on-chain metrics check out our free charting tool, formula builder, correlation tool, and mobile apps.

Network Data Insights

Summary Metrics

Source: Coin Metrics Network Data Pro

Ether (ETH) market capitalization grew 6.2% week-over-week, with price topping $2K once again over the weekend. Most ETH usage and economic metrics were also up on the week with active addresses growing 3.4%. ETH adjusted transfer value saw a 35.6% jump week-over-week, a portion of which was due to the launch of the FEI protocol which accumulated over $1B worth of ETH

Bitcoin (BTC) also had a strong week with most metrics in the green. Usage continued positive growth with active addresses up 4.8%. Adjusted transfer value also increased by 16.4% for an average of $13.7B per day, maintaining a lead over ETH. 

Network Highlights

The amount of Tether launched on Tron (USDT_TRX) is catching up to the amount of Tether launched on Ethereum (USDT_ETH). As of April 11th there’s 21B USDT_TRX, compared to 23.42B USDT_ETH. USDT_ETH currently has about 52.7% of the combined supply share of the two, as shown in the following chart. 

Source: Coin Metrics Network Data Charts

But despite similar supplies, USDT_ETH and USDT_TRX seem to have different use cases. USDT_ETH appears to be used for relatively large transfers, while USDT_TRX is typically used for smaller transactions. For example, USDT_TRX’s median transfer size is currently $263 compared to $1,498 for USDT_ETH. This makes sense given that Tron’s fees are miniscule compared to Ethereum’s, making it more cost effective to send small transfers.

Source: Coin Metrics Network Data Charts

Despite having lower median transfer value, USDT_TRX has passed USDT_ETH in terms of daily active addresses. As of April 11th USDT_TRX has 262.54K active addresses compared to 89.65K for USDT_ETH.

Source: Coin Metrics Network Data Charts

Coin Metrics Updates

This week’s updates from the Coin Metrics team:

  • Check out our new market-data focused newsletter State of the Market, featuring weekly updates on market conditions.

  • We’re excited to announce the new Coin Metrics mobile app. View real-time cryptoasset pricing and relevant on-chain data in a single app!  Download for free here: https://coinmetrics.io/mobile-app/

As always, if you have any feedback or requests please let us know here.

Subscribe and Past Issues

Coin Metrics’ State of the Network, is an unbiased, weekly view of the crypto market informed by our own network (on-chain) and market data.

If you'd like to get State of the Network in your inbox, please subscribe here. You can see previous issues of State of the Network here.

Check out the Coin Metrics Blog for more in depth research and analysis.

Coin Metrics' State of the Network: Issue 97

Tuesday, April 6th, 2021

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Weekly Research Focus

Bitcoin On-Chain Indicators Update

By Nate Maddrey and the Coin Metrics Team

Disclaimer: Market analysis with on-chain indicators is a relatively nascent field and indicators are still being developed and refined. It's Important to note that past success does not guarantee future success; although these indicators have historically been informative, it does not necessarily mean this will always be the case. The green and red indicator zones on each chart are based off of past performance, but are not an exact science. This article does not constitute investment advice - please conduct your own research and view these metrics as one piece in the larger picture.

In December 2020 we released the Bitcoin On-chain Indicators Primer, an in-depth introduction on how to use on-chain data to help gauge crypto market cycles.  A lot has happened since then, including several new all-time highs for both bitcoin (BTC) and ether (ETH). In this week’s State of the Network we update some of the charts featured in the report and look at how things have changed since the start of 2021. 

Market Value to Realized Value (MVRV)

Market value to realized value (MVRV) has historically been one of the most reliable on-chain indicators of bitcoin market tops and bottoms. MVRV is calculated by dividing bitcoin’s market capitalization by its realized capitalization. Realized capitalization can also be thought of as a gross approximation of bitcoin’s aggregate cost basis. In our variant of the MVRV calculation, we use free float market capitalization which is calculated using liquid supply as opposed to total supply.

Historically, a high ratio of market capitalization to realized capitalization has signalled that bitcoin price was near a local maximum, while a low ratio has indicated that price is near a local minimum. The few times that MVRV has dropped below one have historically been some of the best times to buy bitcoin. An increasing MVRV indicates that current sentiment is increasing fast relative to estimated aggregate cost basis, while decreasing MVRV signals the opposite.

On January 8th, 2021 as BTC reached $40K for the first time, free float MVRV reached 2.96. This was a similar level to June 2017 when MVRV reached a high of 3.05. The following day BTC price began to decline, and dropped below $34K by January 12th.

MVRV topped 3.0 on February 20th for the first time since December 2017 and peaked at 3.09 on February 21st. This signalled another local peak, as BTC price reached about $57.5K on February 21st before falling to below $47K by February 28th. An MVRV of 3.0 has been a signal of local tops during the current market cycle (at least so far), as indicated by the red area in the below chart. 

On March 13th MVRV approached 3.0 once again, increasing to 2.96 as BTC briefly topped $61K. It has since dropped down to 2.65 as of March 31st. It still has not reached levels seen at the top of the last two bull runs. 

Source: Coin Metrics Network Data Pro

Spent Output Profit Ratio (SOPR)

Spent Output Profit Ratio (SOPR) gives another vantage point into bitcoin market cycles. Introduced by Renato Shirakashi in 2019, SOPR can act as a proxy for gauging whether holders are selling at a profit or at a loss.

SOPR is a ratio of bitcoin’s price at the time UTXOs are spent to its price at the time they were created. In other words, it’s a proxy for price sold divided by price paid. Every time a transaction occurs, we can compare bitcoin’s price at the time the UTXOs in that transaction were created to the price at which they were spent. Creating a ratio of the two gives a simple way to estimate whether the bitcoin in the UTXO was sold at a profit or loss. 

SOPR can be computed for individual UTXOs, but it can also be computed for a group of UTXOs. The following chart shows the combined SOPR ratio of all UTXOs spent, aggregated on a daily basis. The metric is also smoothed with a 7-day rolling average as SOPR tends to be relatively volatile.

Historically, a high SOPR has signalled that bitcoin price is reaching a local maximum. Conversely, a low SOPR theoretically signals that holders are selling at a loss, which has historically indicated a good time to buy. A SOPR of 1 is also particularly important to watch, as it signals the tipping point from selling in profit to selling at a loss.

On January 8th, as BTC price topped $40K, BTC SOPR (7-day average) reached 1.048, its highest level since December 2017. The following day BTC price began to decline, and SOPR bottomed out at 1.004 on January 26th with BTC price at $32.6K. It has since rebounded to about 1.015. 

Source: Coin Metrics Network Data Pro

HODL Waves

Bitcoin (BTC) age distribution bands, also known as “HODL waves,” show BTC’s supply grouped by the time since it was last moved on-chain. Introduced by Unchained Capital in 2018, HODL waves give a macro view of how BTC’s supply has shifted over the years. Bitcoin’s supply movements can be used as an indicator for market cycles.

Reading from the bottom of the chart up the red colored bands show the percent of supply that has been active relatively recently, ranging from less than a day to 90-180 days. The “1-7 Days” band is the percent of total supply that’s been held for at least 1 day but less than 7 days, “7-30 Days” is the percent of supply that’s been held for at least 7 days but less than 30 days, and so on. 

Historically, short-term supply movement has peaked during market cycle tops. For example, in December 2017, over 32% of BTC supply had moved on-chain within the previous 90 days as the price of bitcoin neared $20,000. By August 2018, the proportion of supply moved within 90 days had dropped to about 15%. 

Conversely, reading from the top of the chart down shows the supply that has not moved for relatively long periods. These long-term bands tend to grow wider as prices reach cycle lows and contract during cycle tops as long-terms holders begin to sell. The dark green band at the top represents coins that have never been moved on-chain apart from the transaction in which they were issued, constituting about 12% of the total supply. 

During the 2013 and 2017 bull runs, the percent of short-term held supply (held for 180 days or less) reached about 50% which coincided with market tops. Periods where long-term held supply has reached over 60% have typically been good times to buy.

Short-term supply activity spiked on January 8th, with about 5% of supply active within the last 1-7 days. As of March 31 only about 36% of supply was active within the last 180 days, still well below the peak of about 50% during January 2018. 

Source: Coin Metrics Network Data Pro

Full Report

Read the original full report here: the Bitcoin On-chain Indicators Primer.

And to explore our other on-chain metrics check out our free charting tool, formula builder, correlation tool, and mobile apps.

Network Data Insights

Summary Metrics

Source: Coin Metrics Network Data Pro

Ethereum on-chain activity surged this past week as ETH broke out to new all-time highs. ETH active addresses averaged 611.K per day over the last week, topping 600K for the first time since February. Transaction fees continued to climb, averaging $26M per day. And spurred on by the price and fees growth, Ethereum hash rate grew by 5.2% week-over-week and once again reached a new-all time high. 

Bitcoin (BTC) also had a mostly positive week, with market capitalization and realized capitalization growing 7.6% and 3.0%, respectively. Fees grew by 22.8% week-over-week with an average of $5.1M a day. Hash rate dropped slightly on the week, but still remains near all-time highs. 

Network Highlights

Ethereum’s on-chain transfer value, typically denominated in USD, has grown to new highs in 2021 as ETH price has climbed. Interestingly, the amount of value denominated in ETH has also surged. This differs from BTC, where the amount of on-chain transfer value denominated in BTC is significantly below 2017 highs. 

Source: Coin Metrics Network Data Charts

Ethereum’s median transfer value denominated in ETH has surged since summer 2020, likely due to the rise of decentralized finance (DeFi). Bitcoin’s median transfer value denominated in BTC had dropped in 2021 as price has risen.  

Source: Coin Metrics Network Data Charts

Since summer 2020 ETH has closed the gap in terms of daily transfer count compared to BTC. But BTC still averages about 926K daily transfers compared to about 854K for ETH. 

Source: Coin Metrics Network Data Charts

The amount of ETH transferred by smart contracts has also risen dramatically since July 2020, again likely due to DeFi. With an average of 3-5M of ETH transferred by smart contracts per day, this accounts for a majority of the surge in ETH on-chain transfer value.

Source: Coin Metrics Network Data Charts

Coin Metrics Updates

This week’s updates from the Coin Metrics team:

  • Check out our new market-data focused newsletter State of the Market, featuring weekly updates on market conditions.

  • We’re excited to announce the new Coin Metrics mobile app. View real-time cryptoasset pricing and relevant on-chain data in a single app!  Download for free here: https://coinmetrics.io/mobile-app/

As always, if you have any feedback or requests please let us know here.

Subscribe and Past Issues

Coin Metrics’ State of the Network, is an unbiased, weekly view of the crypto market informed by our own network (on-chain) and market data.

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