A Chainalysis report says that the number of Ethereum (ETH) wallets accounts for the majority of crypto participants as of July 2023. While the number of Bitcoin (BTC) wallets grew to 50 million, ETH balance-holding addresses have risen to 79 million.
Bitcoin faces the lowest volatility risk, with 4,500 wallets holding 50% of the asset supply. On the other hand, ETH offers the highest chance of price swings, as only 131 wallets account for half its supply.
Staking Pools Boost Ethereum Liquidity Post-Merge
Staking pools like Lido and Rocket Pool offer investors rewards based on how much Ethereum they deposit. As a result, despite ETH’s large concentration in a few wallets, the distribution of ownership means individual withdrawals are unlikely to be large enough to move the price.
So-called “liquid-staking” DeFi protocols like Lido essentially preserve Ethereum liquidity while offering the long-term benefits of staking. Maintaining liquidity is critical to insulating prices against market turbulence.
Lido issues investors a derivative token for each Ethereum they deposit. The token, called “staked ETH,” is worth the same as ETH and can be invested in decentralized finance protocols to earn returns.
Staking pools became popular in the run-up to Ethereum’s Merge, which saw its consensus layer change from proof-of-work to proof-of-stake. Using these services, investors can stake ETH to share some of the rewards validators earn for securing the Ethereum network.
Learn more about staking here.
Ethereum and USDC wallets consistently rank high on the list of how many tokens are held by active traders. As of July 2023, active wallets have about two-fifths of the supply of USDC and almost half of all ETH.
ETH and USDC activity are likely correlated with the pair’s widespread use in decentralized finance (DeFi). Traders often convert US dollars to dollar-pegged stablecoins like USDC to use in decentralized finance services.
Ethereum Wallets Have Been More Active
Between Q3 2020, during the so-called “DeFi summer,” and Q1 2022, Ethereum wallets have been more active than Bitcoin holders. They transacted at least once a month and consistently exceeded BTC activity during the 2021 bull market.
Ethereum wallet holders remain more active than Bitcoin holders | Source: Chainalysis
On the other hand, Bitcoin holders tend to take a long-term view, with most of the supply held by wallets that don’t transact often. Stats show that exchanges have only held 20% of all BTC since 2020.
After the failure of Terra in mid-2022, several companies appear to have stocked up on the asset in anticipation of the next bull run.