Coin Metrics' State of the Network: Issue 94
Tuesday, March 16th, 2021
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Weekly Research Focus
A Year After The Crash
On March 12, 2020, amid rising panic over the rapid spread of COVID-19, bitcoin (BTC) crashed from about $8,000 to under $4,000 in a 24 hour period. The rest of the crypto market came crashing down with it. Now, a little over a year later, we take a look back at how much things have changed since that notorious day.
While the price drop may have seemed cataclysmic at the time, in hindsight it was a great opportunity to invest in BTC and other cryptoassets at a relatively discounted price.
As price crashed on March 12th, the market value to realized value (MVRV) ratio plummeted down to 0.88. MVRV is calculated by dividing bitcoin’s market capitalization by its realized capitalization. Historically, the periods that MVRV has dropped below 1.0 have been some of the best times to invest in BTC. You can read more about MVRV in our Bitcoin On-chain Indicators Primer.
This indicator held true for the March 12th crash. BTC’s price closed at $4,959 on March 12th, 2020. On March 12th, 2021 it closed at $57,335, a gain of over 10x (1,000%).
Similarly, ether (ETH) had huge growth over the last year. ETH closed at $110 on March 12th, 2020 and $1,768 on March 12th, 2021, a gain of over 16x (1,600%).
User adoption has also grown significantly over the past year. The following chart shows the growth of addresses that each hold at least 0.0000001% of total supply. ETH addresses have seen a 55% increase, from 2.52M to 3.90M, compared to 11% from 5.98M to 6.65M for BTC.
But large BTC addresses grew faster than large ETH addresses. The below chart shows the number of addresses holding at least 0.01% of total supply. Notably, large BTC addresses started increasing soon after the crash, with a big jump up in November, December, and January. This is likely due to the big increase in institutional investors throughout the year. BTC addresses with at least 0.01% of supply went from 993 on March 12, 2020 to 1,057 a year later, and peaked at 1,243 on December 27th, 2020.
BTC large addresses dropped dramatically at the end of December 2020. This is likely due to an exchange (or several exchanges) consolidating and shuffling addresses, but the exact cause is unknown.
Unlike BTC, large ETH addresses decreased immediately following the crash and remained down for most of the year. But they started increasing in 2021, potentially a sign of incoming institutional investors. As of March 12th, 2021 there are 1,066 ETH addresses with at least 0.01% of supply, an 8% growth from 983 on March 2020.
Stablecoins have also had huge growth since the crash. Initially, stablecoins were likely used to hold money on the sidelines amidst the market volatility. Following BTC’s drop many rushed into the relative safety that stablecoins provide. But since then, stablecoin use cases have flourished. Stablecoins are now used extensively in decentralized finance (DeFi) and are increasingly being used to move money around the world. Stablecoins are also used for trading, where they’re used to move in and out of other cryptoassets.
DAI, USDC, and Tron-issued Tether (USDT_TRX) supply have all grown by at least 17x since March 12th, 2020. Overall, total stablecoin supply has grown from about 6.4B to over 55B over the course of the year.
USDT_TRX in particular has grown from almost nothing to one of the largest stablecoins in existence. USDT_TRX addresses holding at least $1 increased by over 74x over the last year. There were only 17,258 USDT_TRX addresses holding at least $1 in March 2020, compared to over 1.3M now.
Removing USDT_TRX from the picture shows that most of the other major stablecoins had large growth as well. USDC has come on especially strong in 2021, with addresses holding at least $1 increasing by over 9x since March 2020 to about 493K.
But looking at on-chain transfer value (30-day average), USDC and USDT_TRX are much closer. Despite USDT_TRX having more than double the amount of addresses holding at least $1 as USDC, the two stablecoins have a similar amount of daily on-chain transfer value. This is because a majority of USDT_TRX transfers are small compared to USDC. While USDT_TRX’s daily transaction count is about 9x as high as USDC’s, USDC’s median transfer value is about 12x as high as USDT_TRX’s.
Bitcoin, Ethereum, stablecoins, and crypto in general have grown tremendously since March 2020. The market is rapidly maturing, and a new group of both institutional and retail investors is flowing in. With activity pushing new all-time highs, the next year is sure to bring another big wave of change as the industry continues to grow.
Network Data Insights
BTC market cap passed $1 trillion this past week as price rebounded back above $60K. On-chain usage was up across the board, with BTC, ETH, Tether, USDC, and UNI all seeing a rise in activity. Hash rate for both Bitcoin and Ethereum also continued to rise. Buoyed by growing miner revenue, Bitcoin hash rate grew 1.7% week-over-week, while Ethereum hash rate grew 2.2%.
The amount of BTC held by exchanges continues to climb in 2021. After reaching an all-time high in early 2020, BTC held on exchanges dropped after the March 2020 crash and trended downward for most of the year. But in November 2020 the trend reversed, mostly thanks to an increase in supply held by Binance and Gemini. This potential signals an influx of retail traders holding their supply in exchanges instead of in their own wallets.
The amount of ETH held by exchanges reached a peak in July 2020 but has been decreasing ever since. This could be at least partially caused by traders taking their ETH off of centralized exchanges to trade on decentralized exchanges, or participate in other parts of decentralized finance (DeFi). In particular, supply held bit Bitfinex and Huobi has plummeted.
This is also reflected in the number of unique transfers sent to exchanges. BTC transfers to exchanges have been growing in 2021, but ETH transfers to exchanges have remained relatively flat. Both BTC and ETH transfers to exchanges are still well below 2018 peaks, which may indicate that retail trading has yet to reach the level seen at the height of the 2017 bull run.
Coin Metrics Updates
This week’s updates from the Coin Metrics team:
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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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