Beginning on 2 January, the price of Ethereum (ETH) began a rapid ascent that today brought it back to pre-FTX collapse levels.
On 9 November it had fallen to just over $1,000, about the same level touched again between 21 and 22 of the same month.
On 1 January it was still at about $1,200, but starting the next day it began a rise that has now lasted for two weeks and overnight brought the price of ETH briefly above $1,600. On 6 November the price also fluctuated between $1,500 and $1,600, although two days earlier it had touched $1,700.
So, in the first two weeks of the new year, it recovered all the losses from the FTX collapse that occurred between 6 and 10 November 2022.
From 2022 to the present: the price of Ethereum
One curious thing about the price of ETH is that during 2022 the lowest peak was not reached in November with the collapse of FTX, but in June, that is, after the implosion of the Terra/Luna ecosystem in May followed by the failure of Celsius.
Thus the price of Ethereum in 2022 is divided into two parts.
The first part, which ended in June, saw the price fall from above $3,800 to below $900, with a loss of more than 76%, while the second part actually saw a kind of lateralization with continuous oscillation between $1,000 and $1,600, with only two occurrences above $1,700.
It is worth noting, however, that the highest peak of the second half of the year was touched in mid-August when it was very briefly back above $2,000, so the current price has recovered the losses of November, but not those of September.
The absolute maximum price was touched in November 2021 above 4,800, and since then the price is still losing 68%.
All this brings the current price in line with that of June 11, 2022, which is after the May crash. The $2,000 touched in August is probably not coincidentally the same level to which the price of ETH reached with the small rebound following the May collapse.
In other words, the current price is back perfectly in line with the high level of the lateralization band following the annual low of June 2022, but not yet in line with the level before the June drop.
Meanwhile, the expansion of the Ethereum network continues.
Since Proof-of-Work was replaced with Proof-of-Stake in September 2022, the number of block validators has exploded.
Indeed, with PoW only miners could validate blocks, at an altogether significant expense in mining machinery and electricity.
In contrast, with PoS, all that is required is 32 ETH to be staked in order to set up a validator node.
And so validators have grown from less than 300,000 at the beginning of 2022 to more than 500,000 at the beginning of 2023. It can be clearly seen that the 2022 growth curve in the number of validators has experienced two strong accelerations: one in March, when the Merge was announced, and one precisely in September, when the Merge was carried out.
In contrast, the number of transactions recorded daily on the blockchain has been declining, as at the beginning of 2022 there were about 1.2 million per day, while now there are about 1 million.
Thus the increase in the number of validators was not a consequence of the increase in the use of Ethereum, but of the shift from PoW to PoS.
The next update
In March this year, the Shanghai fork is expected to take place, which is the Ethereum upgrade that will make it possible among other things to remove ETH staked on the new PoS-based blockchain.
A few days ago, a new testnet for this update, called “devnet 2,” was launched.
Curiously, the achievement of the 500,000 validator milestone occurred just one day after the release of devnet 2.
It is worth noting that there are now more than 14.3 million ETH locked in staking on the Beacon Chain, and it is not known how many of these will be drawn down once the Shanghai upgrade takes place.
As of early 2022 there were less than 9 million, so it is possible to imagine that only a small percentage of the ETH in staking will actually be put on the market in March.
The impact of PoS on the price of Ethereum to date
From these numbers it is possible to assume that the fact that as of November 2022 the price of Ethereum has not fallen below June levels may actually be related to the Merge, i.e., the replacement of PoW with PoS, and the increase in ETH being staked.
But at the same time it suggests that the release of staked ETH may also not convince their holders to sell them, since their current market value is still well below that of March 2022, which is when there was the first surge in the number of validators.
Also related to this dynamic could be the increase in ETH dominance in crypto markets at the same time as a decrease in Bitcoin dominance.
As of February 2022, BTC’s dominance was more than 40%, while ETH’s dominance was less than 18%. Even though in June the former rose to 45% and the latter fell below 16%, coinciding with Ethereum’s annual price lows, once that collapse ended Bitcoin’s dominance fell to 36% in November, while ETH’s dominance rose to 19%.
This trend seems to have stopped in 2023, with BTC’s dominance back to nearly 40%, while ETH’s dominance is stable at about 18%. So the impact of the move to PoS on the price of ETH seems to have now petered out, even though it began months before the Merge.