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In fact, ETH has reached its one-year low. In this case, the Merge on September 15 failed to revive the network: ETH reportedly posted $1.96 billion in net revenue in the second quarter of this year, with only $274.12 million in the third quarter.
According to Bankless, the number of active ETH addresses increased by 3.09% compared to Q2. This brought the total number of active addresses to 506,384. There was also a spike in ETH rates as the deposit contract rose 80% to 14.1 million depositors. Out of 14.1 million, there were 442,000 unique validators and 84,600 unique contributors.
Interestingly, most of the increase in rates could be attributed to Lido Finance (LDO). Apart from offering a liquidity pool for ETH participants, LDO was one of the best-performing crypto assets of the quarter. The protocol accounted for 4.25 million new ETH contributors.
Another metric that has increased for Ethereum is its total value locked (TVL) in Layer 2 (L2) protocols, which have grown from 2.40 billion to 4.73 billion. The change in the ETH price also demonstrates similar dynamics. The last yearly high was $3.4K at the end of March; now, the asset is trading at $1338. This drop in yields could potentially be attributed to three major factors: a significant downturn on the global market, the Merge, and OpenSea update followed by fee cuts.
It seems that a number of concomitant factors could lead to a further drop in the profitability of Ethereum and the outflow of users.
In the wake of the reduction in gas fees (a unit of computational work of transactions or smart contracts), staking rewards are also decreasing. Now this figure is from 4 to 5% per annum. If the ETH burn rate is maintained and the forecast for the price trend is pessimistic, we may assume that the reward could fall even more.
We need to explain here. Ethereum generated nearly 137,000 ETH in transaction (“gas”) fees between July and October, compared to over 1M in Q1. The drop was most noticeable between Q2 and Q3, when fees fell 74%. To secure Ethereum, users "stake" or lock their ETH in exchange for a reward, which is currently around 4-5%. This reward is partly based on the fees paid for each transaction: tip fees that used to go to miners before the Merge, now go to ETH stakers. If network activity continues to fall, this could further reduce staking revenue.
We suppose that the effect of the Merge may fully affect the price of Ethereum only after 7-8 months. By the way, Vitalik Buterin himself expressed a similar idea. Today ETH is trading at a weekly low level, while the weekly high is $1377.
Author Bio
Daniel Kostecki is an award-winning senior market analyst and a Director of the Polish branch of Conotoxia Ltd. He is a victor of the FxCuffs statuette for “Blog of the Year” and “Personality of the Year”. He has 15 years of experience on the financial markets and a diploma in Economics from the University of Szczecin in Poland. Daniel isprivatelyconnected to the financial markets since 2007 and professionally - since 2010. Author of numerous commentaries and analyses of the situation on the financial markets and a guest on Polish TV, press and radio.
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