Ethereum
Ethereum activity surges as cryptocurrency market remains ‘healthy’: report
A new report from the institutional division of crypto exchange Coinbase, prepared in partnership with crypto intelligence firm Glassnode, reveals that despite a period of consolidation in Q2 2024, the cryptocurrency market remains robust and continues to grow.
The second quarter was marked by price consolidation, with prices for major assets remaining in a relatively narrow price range, the report said. In contrast to the meteoric rise in the first quarter, this suggests market indecision. Despite this, broad market indicators suggest continued health and potential for future growth.
“The price correction in the second quarter is both healthy and an integral part of the current market cycle,” the report notes.
This view is supported by strong trading volumes in cash and derivatives markets, continued inflows of new investors and notable progress on the regulatory front.
“Beyond simple price movements, we discover a very healthy crypto landscape,” the report adds.
The report also highlights the increase in activity on the channel, particularly on the Ethereum network and its layer 2 solutions.
The average number of daily active addresses on Ethereum and major Layer 2 networks increased by 127% this year, according to the report, driven by increased activity on these scalable solutions. The number of transactions in the Ethereum ecosystem increased by 59% in the second quarter, although most of that growth came from Layer 2 scaling networks.
This increase in activity highlights the expansion of Ethereum’s use cases, from decentralized finance (DeFi) to NFTs and beyond. The diversification of investor interest and growth in on-chain activity are promising signs of a healthy market.
“We are still in the middle of the growth cycle as attention remains well diversified in the space,” Duong says.
Image: Coinbase Institutional/Glassnode
A crucial aspect of understanding market health 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 where MVRV trades above its 365-day average are typically aligned with strong uptrends,” says James Check, principal analyst at Glassnode.
This metric is critical in determining whether the market is overheated or undervalued, providing insights into investor profitability and potential market corrections. One of the key takeaways from the report is the decline in correlations between crypto assets during the second quarter. This trend suggests that the cryptocurrency market is maturing, the report observes.
Image: Coinbase Institutional/Glassnode
According to David Duong, head of institutional research at Coinbase, “this decoupling strengthens the case for owning cryptocurrencies as a way to systematically diversify your portfolio.”
Edited by Ryan Ozawa