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The state of crypto – May 2023 The state of crypto – May 2023 The state of crypto – May 2023

The state of crypto – May 2023

Mads Eberhardt

Cryptocurrency Analyst

Summary:  The Ethereum Shanghai hard fork triggered an increase in exchange balances of Ether, dormant circulation, and circulating supply of the last five years, as holders mainly reshuffled staked Ether and staking rewards of the past more than two years. The world’s largest cryptocurrency exchange Binance is expected to distribute staked Ether and staking rewards to clients in the next couple of days, however, we do not expect that event to spark heavy selling pressure.


Immediately upon interacting with a blockchain, much data becomes publicly available on a public ledger. Analyzing this data may provide crypto traders and investors with helpful insight into the present state of the market. In “The state of crypto”, we take a look at the most important metrics to observe the market based on transaction and trading activity. Our main focus is the two largest cryptocurrencies Bitcoin and Ethereum, and we divide the metrics into short-term and long-term indicators. You find the report for the last month here.

Short-term

Ethereum successfully implemented the highly anticipated hard fork called Shanghai – or Shapella – on the 12th of April. Among other minor advances, the most noted addition was the technological possibility to unstake Ether. This slowly opened the floodgates to the 19.2mn staked Ether worth about $37bn at the time, some of which have been staked since the 1st of December 2020, effectively locked for about 2.5 years. This amounts to more than 20% of the total circulating supply of Ether. The option to unstake Ether has caused an intense reshuffle of staked Ether, alongside staking rewards for the past more than two years. It is arguably the reason for the slight uptick in exchange balance and dormant circulation of Ethereum in April.

In particular, the exchange balance of Ether increased a whole lot yesterday on the 1st of May, as Ether worth $505M was transferred to the world’s largest cryptocurrency exchange Binance. At first sight, it appears to be an unknown wallet transferring the Ether, however, it is a transfer from Binance itself, specifically from its wallet with its clients’ staked Ether and staking rewards. Binance is likely to distribute the Ether to clients in the coming days and weeks. This may increase selling pressure, in case many clients decide to liquidate the Ether. However, we do not expect the majority of the holders to do so, considering that the option to unstake Ether has so far triggered much less selling pressure than anticipated.

Exchange Balance in Percent. During times when crypto investors are more inclined to sell crypto, they often store their cryptocurrencies directly on an exchange to prepare to sell their holdings. On the contrary, they often move the funds to private wallets when they are less likely to liquidate them. In other words, low exchange balances on exchanges are often perceived as valuable for a potential upward trajectory. Source: Santiment
Exchange Inflow. This metric solely concerns the total deposit of Bitcoin and Ether to exchanges without considering the withdrawal of funds. By only considering deposits, we may better interpret what leads to sell pressure. Source: Santiment
Dormant Circulation. Shows how many Bitcoins and Ether were moved after not being moved for at least 365 days prior to that – accumulated on a daily basis. A high number may express eagerness from long-term holders to liquidate their portfolios. Source: Santiment
Supply Distribution for BTC. This illustrates the supply distribution in percent of Bitcoin and Ethereum based on the amount addresses hold. This may indicate which groups are buying or selling, for instance, whether whales are selling or buying. Source: Santiment
Supply Distribution for ETH. Source: Santiment

Long-term

The circulating supply of the past five years continued to marginally decrease for Bitcoin in April, whereas it increased significantly for Ethereum. The latter was primarily due to the Shanghai hard fork, as it has set off dormant wallets to primarily start to stake. With such a large jump in a single month, the estimate of how much Ether nobody has access to as it is lost in wallets must be lowered, increasing the real circulating supply.

Contrary to March, crypto ETPs, mutual funds, OTC trusts, and other exchange-traded products saw an inflow in April. This indicates that more traditional investors acquired crypto in April, but it has a somewhat immaterial impact when zooming out at the whole crypto market.

Circulating Supply (5 years). For Bitcoin and Ethereum, there are continuously issued new Bitcoins and Ether to the supply, respectively. However, it may be the case that someone is permanently unable to access their wallet, which means the supply technically is lower. By looking at Bitcoin’s and Ethereum’s supply that has moved in the past 5 years, we might better interpret the authentic supply and whether large inactive wallets suddenly turn active. Source: Santiment
Market Value to Realized Value (MVRV) Ratio (5 years). The market value to realized value ratio (MVRV) calculates the average profit or loss of all holders based on when each token last moved over the past 5 years. For example, if the MVRV ratio is 1.5, holders are on average estimated to be up by 50%. Source: Santiment
Inflow and Outflow in ETPs, mutual funds, and OTC trusts. CoinShares publishes a weekly report on inflow or outflow into crypto ETPs, mutual funds, and OTC trusts. Since these products are particularly popular among more traditional investors, an inflow or outflow may describe the sentiment among this group of crypto investors.
Source: Saxo Group
Source: Saxo Group
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