Hello readers,

Treasury companies have acquired over 3.4 million ETH in the last two months. That’s $14.6 billion at current market prices.

The rotation of capital is showing up across markets. BTC dominance has fallen from 65% to 57%. ETH is up 81% (171% from the April lows).

But that’s all in the rear-view mirror. Now we need to look forward.

This week, we share an onchain data update while anticipating ETH’s next move.

Disclaimer: Views expressed are the author’s personal views and should not be relied upon as investment advice.

Let’s go.

ETH Onchain Data

ETH vs BTC

As noted in the intro, liquidity has been flowing into ETH via “treasury” firms.

It’s also flowing in through the ETFs…

ETFs

Since July 1st, ETH has seen over $9.4b of net flows — a remarkable figure for such a short period.

These flows place the combined ETH ETFs in the top 10 of all ETFs on the market — suggesting institutional demand at levels previously seen only in top-tier equity & bond ETFs.

In total, the ETH ETFs have seen nearly $14b of net flows and hold $29b of assets under management. Combined, they hold 5.4% of the outstanding ETH supply.

Over the same period, BTC has seen $5.4b of net flows.

Investors are rotating to ETH. We think this will continue.

But not in a straight line (more on this later).

Options Open Interest

For further evidence as to where investor interest and risk-taking are moving, ETH options open interest is currently at over $15 billion, just off all-time highs.

It’s up 158% over the last two months alone. We think a lot of this is institutions hedging ETF exposure.

For reference, BTC open interest is currently $44b, off its all-time high of $54b established in mid-August.

Validator Queue

There is currently 927k ETH waiting to exit the staking queue ($4b).

With ETH up 81% the last few months and 171% off the April lows, it’s not surprising.

At the same time, there is now 787k ETH ($3.4b) entering the validator queue (likely ETH treasury companies staking their ETH for yield).

How much of the exiting ETH is likely to be sold?

It’s difficult to say. A lot of the ETH staked is with crypto exchanges such as Coinbase, Binance, and Kraken. It’s possible that some of the movement is due to operations in a bull market. Of course, some of it is likely to be sold.

As this reshuffling takes place, we may see some volatility in the ETH price (and some FUD on crypto Twitter).

DeFi: Active Loans

With active loans approaching $40b, Ethereum DeFi is alive and well.

The vast majority (71%) is on Aave.

As measured by total assets under management/in smart contracts (TVL), Aave would rank #38 amongst US banks.

DEX Volumes

Avg. daily DEX volumes are up 266% from the lows in April, with the L1 driving roughly 67% of the volume.

L1 Transaction Fees

With DeFi activity on the rise, the average transaction fees on L1 have spiked for the first time since Q4 of last year.

The reflexivity flywheel is underway: price —> onchain activity —> improving fundamentals (demand for block space & higher tx fees) —> price —> onchain activity.

Long-Term Holder Net Unrealized Profit/Loss

In terms of long-term holder Net Unrealized Profit/Loss, ETH has yet to reach the extreme levels we’ve seen in past cycles (blue).

Market Value to Realized Value

Realized price is a proxy for the average cost basis of ETH’s circulating supply. It’s currently $2.3k.

When the market value meaningfully detaches from the realized value, it’s a sign that the market is getting overheated.

The current reading is 1.87. This indicates that ETH holders, on average, are sitting on 87% unrealized gains.

The MVRV got as high as 2.2 in Q1 of last year and 3.8 in the ‘21 cycle.

*Please note this data captures onchain ETH only (does not include the ETFs + ETH held on exchanges).

Price Targets

Where do we go from here?