Brief Analysis of Current Situation of the Ethereum Public Blockchain
Taking a closer look, the Ethereum network turned a profit in February of this year, with revenue steadily increasing throughout the first quarter. In March, revenue reached $606 million, constituting 51.7% of the total first-quarter revenue. During March, Bitcoin prices soared to historic highs, fueling optimism in the crypto market. This, coupled with a surge in on-chain transaction volume, significantly boosted Ethereum network's average gas fees and total fee revenue.
Comparing network revenue to operating costs, Ethereum network's operational expenses have remained relatively stable, hovering around $4 million per day since the merge in September 2022. However, with the rise in ETH prices and block space demand, this figure started climbing from mid-to-late February and currently sits at around $8 million per day.
In terms of revenue, Ethereum began generating network income following the implementation of EIP-1559 in August 2021, which introduced the gas fee burning mechanism. According to EIP-1559, all base fees required for each transaction are entirely burned, thus, network revenue is directly proportional to on-chain transaction volume and block space demand. The more on-chain transactions and the greater the block space demand, the higher the average base fee burned.
However, when we extend our observation period to the previous bull market cycle, Ethereum's current revenue-generating capacity has actually decreased, which is strongly correlated with market cycles. In contrast, during the peak of the bull market in late 2021, Ethereum's daily average revenue was approximately three times higher than the current figure.
Furthermore, the transition to Proof of Stake (PoS) has indeed become a key factor in Ethereum's financial sustainability. Before transitioning from Proof of Work (PoW) to Proof of Stake, Ethereum still required economically intensive labor in the form of GPU mining to maintain its network, resulting in very high operational costs paid to miners. According to the Ethereum Foundation, before the merge, Ethereum network had to pay miners 2 ETH every 13.3 seconds (i.e., one block), resulting in approximately 13,000 ETH in daily operational costs, including ommer blocks (blocks not included in the longest chain).
With the transition to PoS, validator nodes no longer require costly maintenance, and network operational costs, based on the total staked ETH (about 14 million ETH), now only require spending about 1,700 ETH per day, directly saving the network about 88% of its costs. Therefore, although Ethereum's revenue-generating capacity has declined, compared to the steep decline in costs, the network can still maintain basic financial equilibrium.
Looking at the data comparison between network revenue and net profit, Ethereum network's gross profit margin has generally ranged from 40% to 70% since the merge, with higher congestion resulting in higher profit margins. Additionally, the entire network needs to maintain a daily revenue of $8 million to achieve profitability. For example, although not within the scope of the first quarter, the chart below shows that Ethereum's fee revenue has been declining throughout April due to market trends, leading Ethereum network to once again enter a loss-making state after achieving profitability for two consecutive months. This indicates how challenging it is to make a chain self-sustaining.
Furthermore, observing the comparison between the daily active addresses and the number of contract deployers (ecosystem developer data proxy) on the Ethereum network, we gain some additional insights. In the first quarter, Ethereum network's daily active addresses remained around 420,000, but the number of contract deployers saw a significant decline, dropping from an average of 4,000 per day in January to 2,000 per day in March.
Looking back, the number of ecosystem developers on the Ethereum network seems to have been in a state of stagnant growth since the end of the previous bull market cycle, and even started accelerating its decline after February 2024. While the market entered a new cycle of growth, the Ethereum network found itself in a predicament of developer exodus and slowing growth of active users, which is closely related to the lack of innovation in ecosystem application scenarios. During the bull market from 2020 to 2022, exciting native crypto innovations such as DeFi, NFTs, GameFi, and SocialFi all emerged from the Ethereum ecosystem, with each narrative having a profound impact on the industry's future development. By 2024, people once again hoped that Ethereum could replicate its miracle and bring forth innovative narrative, but currently, apart from Eigen Layer's re-staking, there are hardly any "new things" within the ecosystem that excite people. On the other hand, this is also because market expectations are misaligned with industry development trends. The innovative development of an industry and its resulting capital effects often show a causal relationship. Similarly, just because the crypto market cycle occurs every four years, it does not mean that industry innovation should also follow the same rhythm. Of course, there are indeed industries such as AI and nuclear fusion that rely on capital leverage to drive technological progress, but clearly blockchain and Web3 are not in this category. More importantly, in the past few months, the crypto market has been largely driven by Bitcoin ETF funds, and the macro environment has not brought significant liquidity injection to the market. The meme frenzy surrounding Solana and the brewing "Base Season" narrative undoubtedly are blood-sucking Ethereum ecosystem. Without playing the "low gas" and "mass consumption" cards, how to increase demand for the blocks sold by the Ethereum network is a core issue that the Foundation and top VCs need to ponder. $ETH #新币挖矿 #ETH #ETH分析 #ETH(以太坊)
The breach of the key level at 66500 poses a risk to the target of 68000. We'll watch if the US EIA's evening release shows a decline in crude oil inventories. A decrease would indicate US confidence in both the Middle East situation and oil prices, benefiting US stocks and BTC, potentially leading to the anticipation of 68000.
BTC has undergone its halving, marking a significant milestone and a major positive development. Despite the weekend halving, BTC faced resistance around 65,500. Retail investors remain torn between fear and greed, waiting to see how institutions in the US stock market respond. While there's a possibility of testing 62,000, the broader trend is set, and the halving bubble has largely dissipated. We are now waiting for the next upward move.
Global BTC 10:00 (GMT+8) (AI Little Black)
Futures long-short ratio: 51%:49% (Bulls and bears are still clashing, making the weekend intense.) Spot buying-selling ratio: 49%:51% (Insufficient weekend data to determine a trend.) BTC: Both runes and inscriptions are beneficial additions to the BTC ecosystem. It is recommended to participate appropriately. And adding BTC positions at lower levels remains advisable.
ETH: ETH continues to suppress the overall market, and there has been significant turnover around 3,100, reflecting the current state of retail investors. Building a base around 3,000 is relatively strong, but if you have extra funds, consider investing in BTC instead.
This week, guess the ETH closing price.
Watch for movements in the US stock market and keep an eye on institutional actions, particularly the status of ETFs.
The major decline in the US stock market led to go down in crypto-related stocks. However, the cryptocurrency market demonstrated independence by witnessing large-scale buying and listing orders around 62,000-61,000. A decent rebound is expected today, aiming towards 66000. If the resistance around this level is broken, we may see a return to the upward trend channel.
Global BTC 10:00 (GMT+8) (AI Black) Futures long-short ratio: 43%:57% (The long-short ratio is not significant, but the position ratio is relatively high, especially with the contract fee rate turning positive. If there is an uptrend, a large number of short positions may be liquidated.) Spot buying-selling ratio: 35%:65% (Unexpected outflow increased, mainly from GBTC outflow, while other selling pressures are not significant.)
BTC: The pullback in the US stock market did not affect the BTC build a base, especially with significant buying and order placement, making 60000 a strong support level. Panic selling seems to have exhausted, so we wait for opportunities, wait for the halving.
ETH: ETH found relative support around 3000, but selling pressure has not decreased, still suppressing the rebound of the market. Positive news is needed for rise. But chips around 3000 can be considered for entry. This is the first time in a week that ETH is recommended for buying.
Yesterday, several Fed officials, including Powell, made intensive statements, with most leaning hawkish. However, interpreting from the English text, it seems more about suppressing inflation expectations, rather than opposing rate cuts or seeing US economic growth as a pressure. Furthermore, we need to deeply understand the core interests of the Fed and the US government. Rate cuts are absolutely correct regardless of inflation. We continue to firmly predict a 25-basis-point rate cut in September.
The approval of the Hong Kong ETF may not bring short-term benefits, but in the long run, it will attract funds from the Asian region, especially family offices and funds. The Asian region has a habit of long-term savings and financial management. Over the next 3-5 years, ETFs are expected to attract $200 billion in inflows.
Launching the Hong Kong ETF at this moment seems like a misstep. It would have been wiser to wait until after the halving, when price trends are clearer. Its hurried release suggests short-term disadvantages rather than benefits. Nevertheless, it signifies a potential shift in China's stance towards cryptocurrency, which is paramount.
The significant drop in the US stock market responded to several negative factors, especially with financial-related stocks leading the decline. The 16th is a crucial moment for the bull-bear transition, but the morning performance was poor, affecting the overall trend for the day. If the US stock market does not rebound today, the recovery period for BTC will become prolonged, and the concept of the completeness of the halving narrative mentioned in the April 8 report will also be impacted.
Global BTC 10:00 (GMT+8) (AI Black)
Futures Long-Short Ratio: 22%:78% (Significant short pressure) Spot Buying-Selling Ratio: 32%:68% (Institutions selling in small quantities, retail investors increasing selling)
BTC: Still influenced by the situation in the Middle East, trading sentiment is bearish. However, there have been no real negative fundamentals in the macroeconomic environment. Stay calm and wait for a reversal. We need a chance, perhaps we can look forward to Powell's speech.
ETH: The ETH/BTC ratio is still rebounding, so ETH leading the decline drives BTC's downturn. BTC will only break out when ETH stabilizes. Net outflows are mostly in ETH and altcoins, with actual outflows in BTC not significant.
The approval of the Hong Kong ETF may not bring short-term benefits, but in the long run, it will attract funds from the Asian region, especially family offices and funds. The Asian region has a habit of long-term savings and financial management. Over the next 3-5 years, ETFs are expected to attract $200 billion in inflows.
The controversy that has arisen since the birth of crypto assets—whether it is a risk asset or a safe haven asset—has intensified.
Is it? Isn't it? Everyone can also vote and express their opinions, which we will compile and publish.
I personally believe it isn't. From the perspective of monetary history and civilization iteration, only core equivalents that transcend civilizations and eras can become safe-haven assets. Therefore, from this perspective, only gold is not only a risk asset but also a safe-haven asset. Shells are not, paper money is not, oil is not. Cryptocurrency depends on information technology and is a product of advanced information technology. It has not yet been able to transcend the limitations of its time. Therefore, it can only be considered a risk asset, and it is a new, unstable, highly risky asset, which is also one of the reasons why it is classified as securities.