Strong hands look to have been backing the recent rally to record highs for Ethereum's ether cryptocurrency.
The number of whale addresses (those holding at least 10,000 ETH) jumped to a 13-month high of 1,103 on Saturday, according to on-chain data from blockchain analytics firm Glassnode. More than 35 whale addresses have been created this month alone, and 75 since mid-November.
The increased accumulation by investors with deep pockets may have put upward pressure on ether's price.
The second-largest cryptocurrency by market value rose to a record high of $1,450 late Sunday and was last seen changing hands near $1,405, representing a 90% gain on a year-to-date basis, according to CoinDesk 20 data.
Small investors looked to have participated in the rally, too. Both the number of non-zero addresses and addresses holding at least 0.1 ETH have risen to record highs.
While the on-chain data is encouraging for ether bulls, drawing conclusions from metrics focusing on address growth changes should be done with care because a single user can control multiple addresses. However, the data would appear to indicate an influx of money into the ether market, probably via new and existing investors.
Data also shows ether is leaving centralized exchanges, possibly creating a supply shortage and facilitating a stronger bullish move, according to one analyst.
The number of coins held on exchanges fell to 15,469,582 over the weekend, the lowest level since October 2019. The exchange balance has declined by more than 1 million in the past four days alone.
Further, exchanges witnessed a net outflow of 666,689 ETH on Jan. 20, the biggest single-day exodus since May 2019.
"ETH leaving exchanges is bullish as diminished supply makes it easier for the price to squeeze higher, generating a supply crisis," trader and analyst Alex Kruger told CoinDesk. "It's clear to me large parties are accumulating."
Ether's outflow from centralized exchanges does not necessarily mean investors are taking direct custody of their coins, which would be the case with bitcoin.
Some traders are likely depositing ether into decentralized exchanges and liquidity pools, while others could be "staking" coins to earn passive income. Staking refers to locking up cryptocurrency to receive rewards for participating in transaction validation on a proof-of-stake blockchain. Ethereum, which is shifting over to a fundamental upgrade, launched its Beacon Chain for that purpose in December.
Stronger gains ahead?
"The ETH slingshot is only now being drawn back, and we can expect a powerful upward move in the first half of 2021," Jehan Chu, managing partner at Hong Kong-based crypto investment firm Kenetic Capital said, adding that increased staking and the growth in decentralized finance (DeFi) is ratcheting up organic demand for the cryptocurrency.
Ether locked in DeFi applications has increased from 6.615 million to 7.002 million in the past 15 days. However, the tally remains well below the early January high of 7.30 million and the 2020 high of 9.771 million, according to DeFi Pulse.
The options market is flashing strongly bullish sentiment, with one, three- and six-month put-call skews trading below zero, a sign of calls (bullish bets) drawing higher prices than puts (bearish bets), according to data source Skew.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.
Learn more about Consensus 2023, CoinDesk’s longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.