Blockchain Bites: ETH Pumps, Coins Leave Exchanges

With ether whales and small holders rising, some analysts speculate about a ETH supply crunch.

Jan 25, 2021 at 5:20 p.m. UTC

Blockchain Bites: ETH Pumps, Coins Leave Exchanges

Ethereum’s and Chainklink’s native cryptocurrencies, ether and link, have set new record highs while bitcoin is in motion to recover losses from its worst week in at least five months. Meanwhile, an early blockchain-based digital collectible sold for $762,000 … what!?

Top shelf

Calling bitcoin bulls:The Income Strategy fund for Miller Value Partners, a legendary hedge fund, recently bought a chunk of MicroStrategy debt issued to buy more bitcoin. Explaining the decision, Bill Miller IV said it was “an almost-free call option” on the cryptocurrency that “has been the best-performing asset over eight of the past 10 calendar years,” Miller wrote in an investor letter. MicroStrategy is not alone. Nasdaq-listed bitcoin mining firm Marathon bought $150 million in bitcoin to become a “pure-play bitcoin investment option” for Wall Street.

New normal. With rising cryptocurrency prices comes an increase in cybercrime and crypto ransoms, said the U.K.’s former cybersecurity chief. To buck the trend, Ciaran Martin said new laws may be necessary. As reported by The Guardian, a growing number of insurance firms are footing the bill for clients targeted by ransomware attacks, which has set the tone that it’s “OK to pay out to criminals.” Industry publication Decrypt has reported two recent cases of crypto-related hacks.

Centralized core? Once Bitcoin Core’s most active maintainer, Wladimir van der Laan has decided to step back. In a blog post last week, the Bitcoin lead called for the project to further decentralize away from community leaders. Calling himself a “centralized bottleneck,” van der Laan also said the community should spin up alternatives to bitcoincore.org, a private website that hosts Bitcoin’s underlying code. “One thing is clear: This is a serious project now, and we need to start taking decentralization seriously,” he wrote.

Quick bites

CRYPTO ADVOCACY: Group Coin Center received $1 million from Grayscale (CoinDesk’s sister company owned by Digital Currency Group. (CoinDesk)
$45B LOCKED: Decentralized finance “market cap” soars along with ETH. (Decrypt)
COUNTERFEIT CLOUDS? A vaping company tapped VeChain to prevent fraud. (Decrypt)
CRYPTO DISSIDENTS: Protestors continue to send bitcoin to Putin’s critic, Alexei Navalny. (Protos)
POLITICAL CRACKDOWN: Crypto ban for Russian public officials. (CoinDesk)
BLOCKCHAIN OPPORTUNITY: Disrupting social. (CoinDesk op-ed)
A HISTORICAL MATTER: Bitcoin was not “caused” by the last financial crisis. (CoinDesk – Crypto Long & Short)

Market intel

Supply and demand. Ether, the native cryptocurrency of the Ethereum blockchain, is rallying as investors appear to be rotating out of bitcoin. The number two crypto in terms of market cap hit a record high of $1,454.32, also notching a 90% year-to-date rise.

This price appreciation seems to be driven by major buyers, as evidenced by the number of ETH “whale addresses,” or those with at least 10,000 ETH, standing at 13-month highs of 1,103 on Saturday. Further, 35 whale addresses have been created this month alone and 75 since mid-November, according to analytics firm Glassnode.

Ethereum’s rally is also minting small holders. Both the number of non-zero addresses and addresses holding at least 0.1 ETH have risen to record highs, CoinDesk market guru Omkar Godbole reports.

So how do all these new bagholders affect ether’s supply? Well, some analysts are raising concerns about a coming crunch, noting that the number of coins held on exchanges fell to its lowest level since October 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 Godbole. “It’s clear to me large parties are accumulating.”

With ETH futures and a number of protocol upgrades on the horizon, prices could continue to climb.

At stake

Beleaguered Ethereum hub ConsenSys is joining the “Digital Belt and Road” by integrating into China’s national Blockchain-based Service Network (BSN).

ConsenSys’ Quorum ledger, built by JPMorgan and targeted towards enterprises that want to build on a private and permissioned version of Ethereum, is the latest blockchain to be wrapped into the BSN. CoinDesk’ enterprise whisperer Ian Allison reports.

ConsenSys bought Quorum from the investment bank in August 2020, for an undisclosed sum, at the same time JPMorgan placed an undisclosed strategic investment in the Ethereum incubator.
Quorum is open source and home of the “JPMorgan Coin.”

The BSN, a base-layer developer sandbox for building blockchain applications across multiple different chains, has been steadily growing since its 2020 launch.

So far it’s expanded to 108 public city nodes in 80 cities in mainland China as well as eight nodes in other cities around the world, according to a press statement.
“China is a great example of where enterprise blockchain is a strong play,” said Charles d’Haussy, director of strategic initiatives and ConsenSys’ man in Hong Kong.

Still, the future for both blockchain-based systems is unknown. While Quorum has reportedly attracted enterprise clients, according to d’Haussy, ConsenSys’ director of strategic initiatives, no specifics have been given. Similar doubts could be raised about BSN – if China builds it, will people come?

Then again, similar doubts could be extended to the whole of the blockchain industry.