As the merge approaches, on-chain data suggests ETH used as store of value


Xeggex

According to on-chain data, as the merge approaches, the dominant behavior across the Ethereum network is to HODL. Coins held by Ethereum investors are maturing to showcase a higher number of HODLers unwilling to sell.

Within the Ethereum ecosystem, just under 60% of investors have held for more than one year, compared with Bitcrypto-coin, which has 80% of HODLers holding for the same period of time.

However, we are now seeing 7-year holders (dark blue) of Ethereum start to increase. From July 28, the first 7-year holders began to show and now hold over 2% of the supply.

Ethereum: HODL Waves (Source: Glassnode)
Ethereum: HODL Waves (Source: Glassnode)

Given that Ethereum mined its first block in July 2015, crypto-coins that haven’t moved in 7-years are likely genesis crypto-coins that have never moved. As time goes on, it is expected that the 7-year HODLers will continue to grow as HODLers who entered the Ethereum ecosystem during the 2017 bull run start to emerge.

Unlike Bitcrypto-coin, Ethereum is not often referred to as a store of value. However, on-chain data suggests that 2% of Ethereum holders believe it could be. Depending on the activity of the network, Ethereum may also be deflationary after The Merge, which adds credence to this theory.

Bitcrypto-coin has an in-built inflation rate of 1.7%, whereas Ethereum could see deflation of 4%, almost 6% lower than Bitcrypto-coin. Yet, Ethereum has robust utility across its network, so a lack of available ETH due to investors holding could impact the network’s performance.

Inflation is a tool designed to encourage spending. If Ethereum becomes deflationary, there will be little incentive to transact on the network.

Further, almost 32m ETH was sitting on exchanges in mid-2020. However, two years later, the amount of ETH dropped to just 20m. The number of long-term HODLers, inflation rates, and supply on exchanges are significant long-term trends required to understand supply/demand dynamics

Ethereum: Balance on Exchanges (ETH)
Ethereum: Balance on Exchanges (ETH) (Source: Glassnode)



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