Data & Insights: Free to Use Ethereum, Aptos Users Yearly Highs

Late Buyers in Shambles?

• The 7DMA of the percentage of ETH supply in profit, which measures how much of the circulating supply of ETH is currently valued higher than the price at which it was last bought or transferred, reached 85.66% this week.
  • This represents its lowest point since November 2023.
  • This figure was at 94% just 3 weeks ago but experienced a notable decline since, which may have been in part due to the market-wide selloff that occurred in this period, which saw ETH's price drop by over 30%.
• The price of ETH at the time of writing is approximately 15% higher than it was at the beginning of the year, yet the percentage of ETH supply in profit is 3% lower.
  • This may be an indication that a large portion of the ETH supply acquired in 2024 were done so from Q2 onwards, in which the price of ETH failed to breach through new highs beyond $4,000.
  • This further exemplifies the notion that the current price of ETH is below the cost basis of a large portion of its buyers this year.
• However, it is worth noting that despite this figure being at its lowest point in 2024, it doesn't necessarily indicate that most ETH holders are net in the red for the year to date, either. Here's why:
  • The price of ETH is currently 15% higher than it was at the start of the year, meaning holders who bought earlier in the year are likely still in profit.
  • Moreover, holders who acquired ETH at much lower prices in 2023 are likely still comfortably in the green.
  • However, this low point does suggest that recent buyers who entered near the 2024 highs may be underwater on their investments.

Almost Freethereum

• The USD average transaction fee on the Ethereum network hit a notable low of $1.47 on Friday, August 16, 2024.
  • According to The Block's data dashboard, this represents the metric's lowest point since November 2020 - levels not seen in nearly 4 years.
  • For further perspective, the current price of ETH at the time of writing is approximately ~$2,600. The last time Ethereum's transaction fees were this low in dollar terms, the price of ETH itself was around $460! 
  • The current low transaction fees reflect a period of subdued on-chain activity on the Ethereum network. This lull coincides with a shift in market focus, as competing Layer 1 blockchains, most notably Solana, have captured significant attention and user engagement in recent months.
• Despite this, there are positives to be highlighted regarding Ethereum’s transaction fees hitting a near 4-year low:
  • First, this indicates the Ethereum network can now maintain similar fee levels as it did nearly 4 years ago while having a more matured ecosystem, higher user base and the price of ETH being over 5x higher, showcasing how the tech has indeed improved over the years.
  • The last time Ethereum’s network fees were this low, it preceded a major market uptrend, where the price of ETH rose by over 10x in the next year. While history doesn't always repeat, this parallel is intriguing (and provides nice hopium) for market participants.

A Long Night for Asset Managers

• Open interest (OI) of longs on CME BTC futures by asset managers reached $4.97 billion two weeks ago.
  • This marks the metric's lowest point since late February/early March 2024 and is a significant drop from the all-time high of $6.74 billion observed in the first week of July 2024.
  • However, there's been a recent rebound, with OI increasing to $5.64 billion last week.
  • The recent dip suggests that asset managers have been reducing their long exposure to BTC, possibly in response to recent market volatility or as part of risk management strategies in a period of macro-economic uncertainty.
• It is also worth noting that despite the recent decline in OI, the current OI is still significantly higher than last year.
  • For perspective, this figure stood at just $1.24 billion a year ago, highlighting substantial and sustained growth in institutional long interest in BTC.

• Meanwhile, OI of longs on CME ETH futures by hedge funds hit a yearly low of $136.26 million.
  • This is the lowest level since mid-October 2023 when it was at $138.47 million.
  • Hedge funds having significantly decreased their long positions on ETH futures could indicate an increasingly cautious stance or increased desire to hedge their positions.
• However, it is worth noting that long OI for CME ETH futures by asset managers have stood relatively strong, with $419.63 million this last week.
  • This figure is nearly double the $214 million recorded at the beginning of the year, which indicates that institutional interest in ETH remains relatively strong, regardless of recent volatility.

Z(K)ero Revenue Left 

• zkSync Era, once a respectable Layer 2 scaling solution, has experienced a dramatic downturn in revenue. Daily revenue has plummeted to a mere $6,800 last week, a stark contrast to its previous high of $746,000 before the airdrop.
  • This precipitous decline coincides with the project's token airdrop on June 24, 2024, where 3.675 billion $ZK tokens (17.5% of total supply) were made available to eligible wallets.
  • The airdrop, while highly anticipated, triggered a mass exodus of users and liquidity from the network, with daily transactions dropping from a peak of 1.8 million to just 200,000.
• The struggles of zkSync Era reflect a broader trend in the crypto market, particularly among Layer 2 solutions and recent token launches.
  • The $ZK token has seen its value plummet by 64.06% year-to-date, mirroring the performance of other recent airdrops like LayerZero's $ZRO token, which is down 19.21% over the same period.
  • The GML2 index, which tracks Layer 2 tokens, has experienced a 66% decline from its March 2024 highs, indicating sector-wide challenges.
• This pattern of post-airdrop decline raises questions about the effectiveness of token distribution strategies in the current market climate.
  • While airdrops are designed to reward early adopters and bootstrap network effects, they increasingly seem to be triggering short-term speculation followed by rapid sell-offs.
  • The exodus of "farmers" - users who interact with protocols primarily to qualify for airdrops - highlights the challenges of building sustainable ecosystems in a market driven by airdrop anticipation.
• As the dust settles on zkSync Era's airdrop, the industry is left to ponder the future of Layer 2 solutions and token distribution models.
  • The project now faces the daunting task of rebuilding its user base and transaction volume in a highly competitive landscape.
  • For investors and developers, zkSync Era's experience serves as a cautionary tale about the volatile nature of airdrop-centric growth strategies and the importance of building genuine, long-term value propositions. ZK still maintains a $2B FDV with the majority of tokens set to unlock in the coming years. 

Aptos User Tx hits yearly highs 

• The Aptos blockchain witnessed an extraordinary surge in activity, with daily transactions reaching a staggering 69 million on August 15, 2024. This represents a significant spike from the network's typical daily average of around 1 million transactions.
  • This record-breaking transaction count raises questions about the nature and sustainability of this activity spike.
  • The dramatic increase appears to be linked to the launch of UPTOS, a fork of the meme-driven platform Pump.fun, suggesting that the surge may be driven more by speculative interest than fundamental network growth.
• This sudden influx of activity highlights both the potential and limitations of blockchain metrics.
  • While high transaction counts can indicate network popularity and capacity, they don't necessarily reflect sustainable ecosystem growth or genuine adoption.
  • The Aptos spike underscores the impact that meme-driven projects can have on blockchain activity, potentially skewing perceptions of a network's health and usage.

• As the crypto community digests this event, attention is turning to more nuanced ways of assessing blockchain performance and adoption.
  • Raw transaction counts, while impressive, may not provide a complete picture of a network's long-term viability or real-world utility.
  • Observers are increasingly looking at metrics such as unique active addresses, total value locked, and the diversity of applications running on the network to gauge true adoption.

• The Aptos surge raises important questions about the future of blockchain adoption and the role of meme-driven activity in the crypto ecosystem.
  • While such events can bring attention to a blockchain, the key challenge lies in converting this temporary spotlight into sustained growth and development.
  • It remains to be seen whether Aptos can leverage this moment to attract more diverse and sustainable projects to its ecosystem, moving beyond speculative interest to foster genuine innovation and value creation.