In the March 22nd issue of his firm’s “On-Chain Insights” newsletter, Lucas Outumuro, Head of Research at crypto analytics firm IntoTheBlock (ITB), dives into the recent criticism and scepticism surrounding Ethereum (ETH). He addresses concerns about ETH’s price performance and perceived regulatory threats, counterbalancing them with on-chain metrics that point to continued growth and bullish investor sentiment.

ITB observes that network fees across both the Bitcoin and Ethereum blockchains experienced declines. Bitcoin fees decreased by 15%, aligning with reduced network activity as the speculative interest around ordinals fades. Ethereum fees dropped notably by 41%, suggesting a slowdown in meme-coin activity.

Examining exchange net flows, ITB highlights a contrasting movement. Bitcoin saw substantial net outflows of $380 million, a decrease from the prior week. In sharp contrast, Ethereum recorded its largest weekly net inflows into centralized exchanges (CEXs) since late 2022, amounting to a staggering $720 million. ITB notes this sizable inflow corresponds with a period of growing regulatory scrutiny towards Ethereum.

ITB acknowledges that Ethereum’s price action has sparked concerns. Relative underperformance against Bitcoin and even traditional markets like the S&P 500 is evident. However, ITB stresses that Ethereum’s trajectory appears promising from an on-chain data standpoint.

The amount of ETH transferred on the Mainnet reached its highest levels since mid-2022, ITB highlights. It goes on to say that the daily average volume trend mirrors the early 2020/2021 bull market. Crucially, this time, layer 2 (L2) solutions like Optimism and Arbitrum appear to be playing a dominant role, facilitating greater activity while helping to lower Mainnet fees. Aggregate transaction numbers on these L2s currently surpass Mainnet volume by over two times. ITB also notes that the amount of ETH held on L2s has recently topped 10 million ETH, a doubling since last year.

ITB’s analysis paints a picture of unwavering conviction among long-term ETH holders. Despite negative headlines and regulatory uncertainty, the volume of ETH held for over a year continues reaching new highs. This lack of selling, ITB notes, aligns with patterns seen in previous market cycles, where holders accumulate after significant dips and unload later in bull markets.

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