Markets
Ethereum Activity Increases as Crypto Market Remains ‘Healthy’: Report
A new report from cryptocurrency exchange Coinbase’s institutional arm, in partnership with cryptocurrency intelligence firm Glassnode, reveals that despite a period of consolidation in the second quarter of 2024, the cryptocurrency market remains robust and continues to grow.
The second quarter reflected price consolidation, during which major asset prices remained in a relatively narrow price window, the report said. In contrast to the meteoric rise of the first quarter, this suggests market indecision. Even so, broader market indicators suggest sustained health and potential for future growth.
“The price correction in the second quarter is healthy and is part of the natural phase of the current market cycle,” the report said.
This view is supported by high trading volumes in spot and derivatives markets, continued inflows of new investors and significant progress on the regulatory front.
“Looking beyond simple price movements, a very healthy cryptocurrency landscape emerges,” the report adds.
The report also sheds light on the growing on-chain activity, particularly on Ethereal network and its level 2 solutions.
Average daily active addresses on Ethereum and major layer-2s have increased 127% this year, the report said, driven by increased activity on these scalable solutions. Transaction counts in the Ethereum ecosystem grew 59% in Q2, though most of that growth came from layer-2 scaling networks.
This surge in activity highlights the expanding use cases for Ethereum, from decentralized finance (DeFi) to NFTs and beyond. Diversification of investor interest and growth in on-chain activity are promising signs of a healthy market.
“We are still in the mid-growth stage, as the focus remains well diversified in the sector,” says Duong.
Image: Coinbase Institutional/Glassnode
A crucial aspect to understanding the health of the market is monitoring the market value to realized value (MVRV) ratio. The MVRV ratio helps gauge market sentiment by comparing market value to realized value.
“Periods when MVRV trades above its 365-day average are typically aligned with strong uptrends,” explains James Check, lead analyst at Glassnode.
This metric is essential for identifying whether the market is overheated or undervalued, providing insights into investor profitability and potential market corrections. One of the report’s highlights is the decline in correlations between cryptocurrencies during the second quarter. The trend suggests that the cryptocurrency market is maturing, the report notes.
Image: Coinbase Institutional/Glassnode
According to David Duong, head of institutional research at Coinbase, “This separation reinforces the argument that owning cryptocurrency can be a way to systematically diversify your portfolio.”
By Ryan-Ozawa