ETH Exchange Balance Reaches 3-Year High as Craze for Ethereum Staking Builds
The crypto market is back to enjoying greens, having recovered much of the losses recorded on Black Thursday. In 2020, the second-largest network is outperforming Bitcoin. Trading above $7,500 Bitcoin is up about 3% YTD while Ether is recording returns of over 48% trading at $193.
Ether has nearly recovered from the 12th of March historic sell-off pic.twitter.com/AutBWGr9Dp
— skew (@skewdotcom) April 25, 2020
Just like the price, the balance of ETH on exchanges is also going the same route. Since early March, BTC held on exchanges like Binance, BitMEX, Bitfinex, Bitstamp, Gemini, Bittrex, Poloniex, Kraken, and Huobi decreased significantly. Over the same period, Ether held by crypto exchanges has grown at a rate not seen since late 2018, as per Coin Metrics.
Moreover, the premium on Grayscale’s Ether product ETHE remains high so much so that “investors buying these shares are essentially buying ETH at a $107.5B market cap, 78% of Bitcoin's $138.5B market cap,” said analyst Ceteis Paribus. Currently, Ethereum’s reported market cap is $21.2 billion. As for the reason behind this premium, Paribus said,
“The only thing I can think of is retail ignorance, but I mean, that's a weak reason for this to go on for months. I really don't get it.”
Institutional investors or primarily hedge funds are buying Ether at NAV with a lock-up period of a year which they can then sell on the secondary market. Tons of these shares are unlocking in summer and late 2020 which would take down this premium which was recently as high as 430%.
“If ETH 10x from here, and the premium collapses, ETHE investors don't even double their money,” said the analyst. And although it will push ETHE prices down, it won’t affect Ether prices. The price of ETH meanwhile is expected to push above $200. This is because Ether is in a growing channel, as a trader points out,
“Bullish because 200DMA has been flipped into support. Bearish because I'm skeptical of rising wedges. If we see a bullish breakout of the wedge, I'd feel a lot better looking for long opportunities.”
Ether investors excited about staking
Last week Prysmatic Labs announced the final restart for Ethereum 2.0 Phase 0: The Topaz Network, having completed three major milestones; Ruby, Sapphire, and Diamond to implement Ethereum 2.0 and help the network bring to a global scale.
This test network represents the full Ethereum 2.0 Phase 0 mainnet configuration and validators will have to deposit full 32 ETH on the Goerli ETH1 testnet to participate.
ETH 2.0 marks Ethereum network’s full transition into Proof-of-Stake along with sharding for scalability. The upgrade is also expected to provide cheaper transactions and greater transaction throughput and further reduce the network’s complexity.
The Topaz test network has been since accepted genesis deposits and in these 10 days, 22,810 validators have joined in with their 32 ETH for staking, as per Etherscan.
EthereumPrice.org has also released a calculator tool to calculate Ethereum staking rewards after the network moves to ETH 2.0 later this year.
“The total ETH staked (as a percentage of circulating supply) plays a significant role in calculating the annual interest earned on a validator’s stake. The higher the percentage, the lower the yield. Rewards are not issued until the network reaches genesis (524,288 ETH staked).”
The annual interest earned on the stake is about 14%.