Since Saturday, the community has shown concern over a move by the Ethereum Foundation, hinting at an intention to sell $30 million worth of ETH. While the market may indeed be entering a corrective phase, is this particular move really significant? Here are our answers.
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Does the Ethereum Foundation want to sell its ETH?
On the night of Friday to Saturday, an address affiliated with the Ethereum Foundation transferred 15,000 ETH to Kraken worth around $30 million. Since then, this event has not failed to make the community react on Twitter.
Indeed, such moves usually signify an intention to sell, and several observers have pointed out that when the Ethereum Foundation conducts ETH sales, this regularly coincided with a local market high :
Ethereum Foundation’s large-scale selling in recent years record: Recently the Ethereum Foundation sold 15,000 ETH. In 2021, EF did sell 20,000 ETH at a high point. But in 2020, 100,600ETH was sold at a price of 657. pic.twitter.com/BCiSlutQ5F
— Wu Blockchain (@WuBlockchain) May 7, 2023
If we look at the price of ETH, it is true that the bullish trend of this beginning of the year seems to be running out of steam, and it is likely that a correction will occur after such a rally :
Figure 1 — ETH price since the beginning of the year
Nevertheless, it is important not to indulge in cognitive biases which may lead to believe that the market is falling due to a supposed sale of the Ethereum Foundation.
Indeed, we are not a priori certain that the ETH have already been sold. On the other hand, even if necessary, such a movement, if it can temporarily move the market, is not sufficient to tip a trend on its own.
Moreover, the Ethereum Foundation has recurring charges like a business. Thus, its cash is allocated to different pillars to finance the proper development of the Ethereum blockchain. Based on this premise, it is quite logical that it chooses to regularly convert part of its ETH against less volatile assets, on the one hand to capitalize on a market rise, but also to pay its expenses.
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15,000 ETH: is it really significant?
Obviously, the fact that an entity participating in the development of a blockchain can sell the native cryptocurrency of this same blockchain has something to react to if we do not take all the elements into consideration. But now that we have explained why, is this amount really significant?
Firstly, in terms of daily volumes, 15,000 ETH is not actually significant. If they are higher than the spot volumes of Kraken, which has recorded between 2,000 and 3,000 ETH daily in recent days on the ETH / USDT pair, it is very little against Binance for example, which easily exceeds 350,000 ETH by day.
Looking at data from our colleagues at The Block, the 7-day moving average of total ETH spot trading volumes was 2.84 billion dollars for the day of Saturday :
Figure 2 — 7-day moving average of ETH spot trading volumes
Also, it can be interesting to compare these 15,000 ETH to other data to realize “what they represent” on a market scale. For example, the daily average of ETH burned over the last 7 days is 10,440.
Over the past 24 hours, 11,437 ETH were destroyedwhich means that currently, 15,000 ETH corresponds to approximately 1.5 days of “burn”.
If a decline can actually occur soon in the market, all these elements, however, put the movement of the Ethereum Foundation into perspective.
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Sources: TradingView, The Block, Etherscan
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I timidly discovered the world of blockchain at the end of 2018 during my quest for financial freedom. Initially invested moderately, it was only two years later that I took the gamble of betting everything on the movement that was taking shape then. I then dedicate 2021 to training myself better to acquire more knowledge and seriousness. As I often like to say: I still have a billion things to learn. And what I do know, I want to share with you.
Vincent Mayor
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