BiC’s Crypto Video News Show – Ethereum Liquidity Crisis: What You Need to Know

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In Brief
  • The ethereum price is breaking all-time highs on some exchanges.

  • Over 2.65 million ether is now being staked on the Beacon Chain.

  • Only 22.06% is located on exchanges.

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In today’s video, host Jessica Walker runs through a similar situation that has already occurred in bitcoin – a lack of liquidity in ethereum. If exchanges are running out, how could this affect the price?



Ethereum continues to be a major player in the cryptocurrency space, even with the relatively high transaction fees during certain periods. 

Ethereum has seen a dramatic increase in price in 2021. It has surged nearly 100% since January 1st, 2021. Now ranging just below its previous all-time high of $1,440, ether continues to gain popularity for several reasons. 



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The Rise of DeFi

Decentralized Finance (DeFi) can be attributed to the rise in popularity of the second-largest blockchain. It has witnessed phenomenal growth as DeFi Dapps continue to grow. Dapp transactions exceeded $270 billion in volume, with ethereum representing 95% of all volume. 

Decentralized applications prefer it, with DappRadar reporting that 45% of all Dapps running on Ethereum. The success of DeFi apps likely suggest exponential growth within the industry.

All-Time Highs Across the Board 

Ethereum’s exponential growth shows in several key areas, including block utilization, hashrate, DeFi users, total locked value, institutional holdings, and staked ethereum to name a few. The ether price recently also hit a new all-time high on some exchanges. 

Ethereum 2.0 Attracting Demand

Ethereum 2.0 promises to offer upgrades to the network such as proof-of-stake functionality and sharding that will allow increased transaction throughput.

The Beacon chain will provide consensus to all shard chains. This will allow information to be shared between shards, thus scaling the network. 

Supply vs Demand

While the demand for ether continues to rise, the number of tokens sitting on exchanges continues to decline. According to blockchain data analysis firm Santiment, only 22.06% are on exchanges. That’s a drop of 4.27% over the past five months. 

Ethereum 2.0 Staking 

One of the more common reasons for a lack of liquidity will be the amounts staked on the Beacon Chain. According to the ETH 2.0 Launchpad, there is now a total of 2.65 million being staked. This rapid increase represents over $3.7 billion in value. 

The increase now means that 2.31% of the circulating supply is being staked, up 0.74% within the last month. Ethereum continues to grow in popularity and most recently saw over $3 billion in transaction volume over Bitcoin

The popularity has likely put to bed any competition that was expected from projects such as Polkadot, Tezos, Cardano, and EOS

2021 will likely see more staking, more approved validators, and the price eventually benefit from scarcity. The lack of liquidity could likely usher in a new all-time high.  

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Ryan is a Fintech specialist with a passion for cryptocurrencies and blockchain adoption. He discovered Bitcoin in 2016 when investing in a Ponzi scheme, and it was the best decision he ever made.

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