Gauging ETH’s future as Ethereum PoS crosses 1 year

  • Ethereum completed its transition into a proof-of-stake (PoS) mechanism on 15 September 2022.
  • While ETH grew briefly at the beginning of the year, its price has trended downward since April.

A year ago, leading Layer 1 (L1) blockchain Ethereum [ETH]transitioned from a proof-of-work (PoW) consensus mechanism to a proof-of-stake (PoS) mechanism.

How much are 1,10,100 ETHs worth today?

Under PoW, miners competed to solve complex mathematical problems to validate transactions and add new blocks to the blockchain. With the PoS consensus mechanism, validators stake their ETH to secure the network and validate transactions.

Ether since then

While many predicted a jump in price following the merge, the network’s native token, ETH, suffered a price decline in the few months that followed the transition. On 10 November, the alt’s price fell to a four-month low of $1085 before initiating a rebound and closing the trading year above $1200.

As the general market recovered from the unexpected collapse of cryptocurrency exchange FTX [FTT] in November 2022, bullish sentiment made a re-entry into the crypto market in the first few months of 2023. Leading crypto assets led the way with significant price gains.

Bitcoin [BTC]for example, started the year exchanging hands at $16,500. As new demand flocked in and the general market gained a semblance of stability, the coin’s price rallied to a high of $30,000 within four months.

Sharing a statistically significant positive correlation with BTC, ETH also saw a jump in its value in 2023 Q1. For the first time since May 2022, ETH traded above the $2000 psychological price level in April before suffering a correction.

Source: Santiment

While the ETH to BTC ratio rallied for a while post-merge, the year so far has been marked by a steady decline.

The ETH to BTC ratio metric tracks the price of ETH relative to the price of BTC and is often used to gauge ETH’s relative strength and weakness compared to BTC.

Data retrieved from the quay showed that the ratio stood at 0.08 following the merge. However, it has declined steadily since then, from 0.08 to 0.07 in the first quarter of 2023 and from 0.07 to 0.06 in the past few months.

Source: Kaiko

One reason for the decline in this metric could be the market’s expectation that the U.S. Securities and Exchange Commission (SEC) will soon approve a spot Bitcoin ETF, while an Ethereum ETF does not seem feasible in the short term.

Also, historical precedents show that BTC typically outperforms ETH in bear markets, hence the decline in the ratio.

As a result of the drop in ETH’s value for most of the year, it has also seen a decline in cumulative trade volume since the merge.

The trade volumes of Ethereum and the top 30 altcoins were similar from September 2022 to January 2023. This was gleaned from the running sum of their trade volumes during that period.

However, as the general market saw growth in January, altcoins began to outpace ETH, widening the gap in trading volumes.

Since the merge, the top 30 altcoins have seen almost $1.5 trillion in volume, compared to $1 trillion for ETH.

Source: Kaiko

ETH staking grows unabated

Despite current market conditions, staking on the network has grown since the merge. With 27 million ETH staked as of this writing, the total amount staked has risen by 107% since 15 September, data from Dune Analytics showed.

The growth in staking on the network is also best shown through the steady rise in the number of Lido Staked ETH (stETH) holders. Data from Etherscan put the holder count at 266,378 at press time.

This has grown despite the consistent decline in the Annual Percentage Rate (APR) given for holding the token. Data from Dune Analytics showed that Lido’s staking APR peaked at 8.59% on 16 November 2022 and has since fallen by 58%.

Is your portfolio green? Check out the ETH Profit Calculator

At press time, interest earned for staking ETH with Lido stood at 3.62%.

Source: Dune Analytics

On Coinbase, this was 3.3%, while it was 3.89% on Binance.

Source: Staking Rewards

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