This Crypto Asset Class Becomes Popular While Ethereum (ETH) Suffers Unrealized Losses: Glassnode Analysis

Glassnode, a market intelligence firm, reveals that despite the bloodbath in the crypto industry one particular niche within DeFi continues to be robust. 

Glassnote conducted the latest analysis and concluded that stablecoins are still experiencing capital inflow while several Ethereum holders stay underwater.

The combined capitalization of the top four stablecoins (USDT, USDC, BUSD, and DAI) too has surpassed the market cap of Ethereum by $3.0 billion. 

Throughout 2020-22, the aggregate market cap of the above-mentioned stablecoin in many instances has peaked at 50% of Ethereum’s market cap. However, in May and June this year, it experienced a dramatic break higher. Such an event has happened for the first time.

The report also mentions the new development of such stablecoin interest on ETH demonstrates:

  • As the unit of account and quote asset, the dramatic increase of USD stablecoins. 
  • The strength of demand for dollar-denominated liquidity over the recent years. The firm also noted that stablecoins now account for three of the top six digital assets by market cap.
  • Over the course of 2020, the sheer magnitude of depreciation of the Ethereum ecosystem valuation.

Further, Glassnode notes that even though not every stablecoin is deployed on Ethereum, the data reveals that the participants in the market are taking a risk-off approach. 

As the disparity between the unit of account for margin debt (USD stablecoins) and the value of crypto collateral, this event points out the reason behind the occurrence of present deleveraging.

Moreover, the company assesses how the latest dip in the prices of Ethereum gas points toward the fact that a notable percentage of token holders are experiencing a significant unrealized amount of losses that have not been witnessed in around four years.

The current profitability of this cohort has dropped past break-even, to now having unrealized losses worth around 23% of the market cap, according to the Long-Term Holder Net Unrealized Profit/Loss (LTH-NUPL) metric.

ALSO READ – From bitcoin and Ethereum crashing upto 30% to Celsius halting withdrawals, hadn’t this week too much? 

This translates to the fact that on average, the strongest, and longest duration ETH investors are now underwater on their positions. September 2018 was the last instance of this, as a result, it went into even deeper capitulation as prices reached $84 from $230, experiencing a decrease of 64%.”

In concluding its analysis, Glassnode referred to historical cryptocurrency cycles, where it is seen that both price increases and leverage are bought through early innovation.

Latest posts by Andrew Smith (see all)