Ethereum, the second-largest cryptocurrency by market capitalization, has witnessed a relatively stagnant number of active ERC-20 addresses in 2023. Despite the price volatility experienced by Ethereum in recent months, the number of active addresses has remained between 200,000 and 300,000. As of August 2, there were approximately 275,000 active ERC-20 addresses, reflecting a slight increase from the 156,000 recorded on June 18. However, it is important to note that there was a notable surge in activity on June 11, with over 446,000 active ERC-20 addresses recorded.
Analyze ETH Price Trajectory
The price trajectory of Ethereum has been closely linked to the activity pattern of its ERC-20 addresses. Ethereum bulls have struggled to surpass the $2,100 liquidation level, which was observed during the latter stages of the first half of 2023. Currently, ETH prices hover around the $1,800 range, indicating a precarious position that is susceptible to a potential drop. Examining the candlestick arrangements on the daily chart further reinforces the likelihood of a downward trend. The lack of significant activity among ERC-20 addresses signals a possible shift from a bullish to bearish outlook in the medium term.
The constant and relatively low number of active ERC-20 addresses contributes to a decreased demand for Ethereum. ETH is primarily used to pay transaction fees, and with less demand, gas fees experience a decline. Lower gas fees usually incentivize more participation and the deployment of complex contracts in decentralized finance (DeFi) platforms. However, due to waning interest, the total value locked (TVL) in DeFi remains below $50 billion as of August 2. DeFi projects such as LidoDAO, Curve, and Uniswap, which facilitate the trading of ERC-20 tokens, have been affected by this decreased activity.
EIP-1559, an Ethereum Improvement Proposal implemented in August 2021, plays a role in mitigating the deflationary effects caused by low ERC-20 activity. With fewer coins being taken out of circulation, the protocol continues to issue 2 ETH after validating each block. This issuance helps offset the reduced demand for ETH and balances the deflationary aspect caused by low network activity. However, it is essential to monitor whether the declining activity will have a long-term impact on the effectiveness of EIP-1559 and the circulation of ETH.
On-chain data reveals that Tether (USDT) is the most actively transacted token within the ERC-20 ecosystem. This comes as no surprise given its position as the third-largest cryptocurrency by market capitalization and its substantial circulation in both the Ethereum and Tron networks. As traders and investors navigate the volatility of the cryptocurrency market, USDT remains a popular choice for stablecoin transactions.
The Stability of On-chain ERC-20 Activity
Despite price volatility, on-chain ERC-20 activity has demonstrated stability. Analysis of ERC-20 transfers between June and July indicates that transaction volumes remained consistent despite temporary price increases during the period. While Ethereum prices rose from $1,630 to $2,000, the subsequent decline in prices did not significantly impact the level of on-chain activity. However, as prices continue to drop, it remains unclear whether there will be a shift in ERC-20 activity. Lower prices may cause token holders to adopt a wait-and-see approach, potentially leading to a decrease in overall activity.
The number of active ERC-20 addresses in Ethereum has plateaued in 2023, reflecting a lack of significant growth. The price trajectory of ETH has been closely aligned with this activity pattern, showcasing the potential shift from a bullish to bearish outlook. The decreased activity has resulted in reduced demand for Ethereum and lowered gas fees within the DeFi ecosystem. The impact of EIP-1559 on the deflationary effects caused by the decline in ERC-20 activity deserves monitoring. As the most actively transacted token, USDT remains a stable choice for many traders. Despite price volatility, on-chain ERC-20 activity has remained stable, but it is uncertain how further price decreases will affect overall activity levels in the future.