Bounty Question

Let’s examine ETH's positive price action this year: \n

Looking at Ethereum Mainnet activity from block: 16310000 (Jan 1, 2023) to block 16420000 (Jan 16, 2023) what on-chain activity could correspond to the recent increases in ETH's price?
What major dapps, tokens, or similar have risen with or more than ETH over that time span?
How has user activity, including in specific protocols, changed over the time period?

BONUS: Share your work on Twitter and tag @flipsidecrypto and any other projects you mention that might find your work valuable

Methodology

The following methods have been used to check the status of ETH value and what has happened in the Ethereum mainnet network:

In the first step, the USD value of this asset was calculated hourly and daily, and the percentage changes of this asset compared to the previous day or hour were also calculated and its graphs were drawn. Also, to further investigate the price trend of this asset with the price trend of Bitcoin (as the cryptocurrency market leader), the value of the wrapped token of Bitcoin (i.e. WBTC), which has a value very close to Bitcoin, is calculated on an hourly and daily basis, as well as the percentage of changes in the price of this asset. Assets were also calculated. The data related to these two assets were both presented together in the charts. For this reason, we were given the opportunity to better observe the trend of changes in the value of both of these assets.

In the second step, considering that the requested time period (January 1st to 16th) was for 16 days, I decided to include the 16 days before this period in the reviewed data. My goal was to compare what happened in the Ethereum mainnet network in these two time periods and evaluate the possible impact of this price increase in various parameters. For this reason, 16 days before this requested time period were included in all my calculations (even in the graphs related to the ETH value, the same 32-day period was considered) and in total the activity status on the Ethereum mainnet in 32 days. Was investigated. These 16-day time periods were respectively named "First Time Period" (from December 16 to 31, 2022) and Second Time Period (Target)" (from January 1 to 16, 2023). In reviewing the activities carried out in the Ethereum network Many parameters were evaluated: total number of transactions, number of successful transactions, number of failed transactions, transaction success rate, number of addresses, average gas fees, fees paid for transactions, average fees paid and average number of address transactions. gas limit and gas usage and the percentage of gas used were also obtained. All these parameters were calculated both in general and on a daily basis.

In the third step (and the next steps), the studies were more focused on the ETH themselves. At this point, I tried to examine the exchange of this asset between the Ethereum Network and the centralized currency exchanges. For this purpose, the data were divided into two parts. From CEX to Ethereum Network and from Ethereum to CEX. Parameters such as the number of transactions, the amount of the ETH moved in these transsexuals, the number of transitors, and the growth of the transactions were calculated.

ETH Price Check

As you can see in the charts above, the rally of the ETH value started in the early days of 2023, but its peak is from the 12th to the 16th of January.

The highest price of ETH in this 32-day period is on January 16, when the average price of this digital asset reached more than $1561. While at 20:00 UTC time, the value of this asset exceeds $1,589, holding the record for the last 32 days.

But looking at the status of the price chart of WBTC (which is a wrapped token of Bitcoin and its value is very close to the value of BTC) shows that this upward trend was not only related to ETH and the USD value trend is the main leader of the cryptocurrency market (i.e. Bitcoin). ) has been very similar to the ETH price trend. This correlation between the price chart of these assets shows that the main reason for this increase in values was something beyond what is happening within each of the networks. But what were these reasons?

Announcement of December 2022 inflation statistics

> On Thursday, January 12, US inflation was announced at 6.5%. This number was very promising because it was much better than the 7.1% figure that was announced for November and it shows the effectiveness of interest rate increase policies. As we know, inflation is currently at the top of all economic discussions around the world. Inflation caused by the expansionary monetary policies of the Corona era is currently plaguing the entire global economy, and Federal Reserve Chairman Jerome Powell has repeatedly indicated in his speeches that the main priority of this institution is to control inflation, even if this is at the cost of recession and unemployment. . The reason for Jerome Powell's insistence on controlling inflation is his awareness that as long as price stability does not govern the economy, stable economic growth will be unattainable.

What does 6.5% inflation mean?

> The reaction of the market and traders of the digital currency market to the announcement of inflation statistics was very positive, and the growth of the price of Bitcoin to above 20 thousand dollars fully confirms this issue. The reason for this positive impression is related to the influence of the inflation rate on the decisions of the Federal Reserve. Many traders believe that with the reduction of inflation and its control, the Federal Reserve will reconsider the increase in interest rates, and no increase in interest rates means the end of the bear market. In response, it should be said that 6.5% is a very good number for inflation and this news is definitely positive news for the American economy, but it is still too early to consider this as the end of the bear market. Despite the decline in American inflation, many major world economies, such as the United Kingdom and the Eurozone, still have double-digit inflation, and there is no guarantee that inflation in the United States will not increase in the coming months. Despite all this, the Federal Reserve has not yet brought inflation under control. Until the inflation rate falls below the interest rate (currently the inflation rate is 6.5% and the interest rate is 4.5%), Jerome Powell cannot claim that inflation is under control. Therefore, despite the significant reduction in the inflation rate, there is still a high possibility of an interest rate increase in the upcoming meetings of the Federal Reserve. What was seen in the speech of Jerome Powell, the head of the US central bank, was an indication of the relative control of inflation in this country and the possibility of a 0.25% increase in the bank interest rate for February. This means that the US central bank is about to enter the phase of lowering bank interest rates due to the decrease in the inflation rate. Also, if the number of 0.25% is approved, this will be the lowest increase in the bank interest rate since the beginning of its plan in 2022, and this leads to the strong formation of the hypothesis of a phase change of the Federal Reserve. It is obvious that the price of Bitcoin and other high-risk assets such as the shares of international companies and even gold will benefit from the decrease in the bank interest rate in the United States. Because if the interest rate drops, the "safe dollar" which has become the best and least risky investment tool in the world over the past year, will lose its appeal to investors and they will turn to other markets; This was almost unprecedented in the past year, and no investor was willing to direct their assets to high-risk markets. > > \

Consumer Price Index (CPI):

> After the release of economic data related to the consumer price index (CPI) on Thursday (January 12), it suddenly rose with a rather sharp slope. Of course, this price increase has spread not only to Bitcoin, but also to altcoins in the market, and some of them, like Compound, faced a 40% jump. The publication of statistical reports related to the CPI index in the United States is of course positive for other financial markets and almost all of them experienced the same jump. For example, the S&P 500 alone rose about 16 percent on Saturday; Although it was considered heartwarming for investors. But the truth of the matter is that these sudden jumps are considered relatively common for the cryptocurrency market, but they are very strange for indices related to various commodity markets, and usually these markets suffer without causing a big shock to them. Such sudden changes are not indicated.

Is Bitcoin price growth a bull trap?

> A bull trap is a trick that is implemented in the financial markets by big players (whales, banks and financial institutions, etc.). In this strategy, the big players, because they have a large volume of sell orders, allow the price to rise so that many small traders become buyers, which creates the conditions for the big players to trade their big sell orders with buy orders. Retailers run at high prices. In the current situation of the price of Bitcoin, the possibility of a bull trap scenario is also high. During the past months, the formation of lower ceilings and floors clearly shows the ruling of the bearish structure on the Bitcoin market. Although the upward movement of recent days has been very strong, it has not broken any important ceiling until now. This is very important when studying the price structure, because breaking the important ceiling requires much higher liquidity. Of course, if the ceiling of $21.5k is broken, it can change the situation.

But let's check what happened on the Ethereum mainnet and how the situation was. First, let's take a look at the status of activities performed on this network:

Ethereum Network Activity

Although in the ETH price we see a clear upward trend since the beginning of 2023, this upward trend does not seem to have the same effect on the number of transactions performed on the Ethereum network. Because despite the growth of about 30% in the price of this asset in 2023 (and the last days of 2022 when the value of this asset was in the same range of $1200), but the number of transactions has increased by only about 6%. (in the second period compared to the first period).

The success rate of transactions in 2023 has also dropped slightly compared to 2022. (about 0.3%)

Although more than 930k transactions were done in the second period compared to the first period, there were only 81 more blocks in the second period than in the first period. This means that, on average, more transactions have been done in the blocks of the second interval. This result can be seen from the graphs of the average number of transactions per block. In the second period, the average number of transactions per block is 139.6 and in the first period, it is around 132.

The chart of the number of daily blocks shows that the number of blocks produced each day was in the range of 7135-7177. It can also be seen that as the value of ETH grows, the number of daily blocks produced also decreases. But this is not a relationship, because in the first period, when the value of ETH was almost constant, the number of daily blocks fluctuated.

The number of unique sender addresses (From Address) of a transaction was much higher in the first period than in the second period (266.5k addresses). But the average number of transactions per sender address shows a slight difference (in the first period, the average number of transactions per sender address is 0.15 more than the second period)

The number of unique addresses of the recipient (To Address) were a transaction in the second period was slightly more than the first period. (28.6k addresses). But the average number of transactions per recipient address shows a greater difference compared to the previous parameter (in the second period, the average number of transactions per recipient address is 0.33 more than the first period)

930k more transactions in the second period, and as a result, more congestion of the network and the increase of gas-fee, has caused users to pay 39.5k ETH as transaction fees for the transactions performed on the Ethereum network in the second period. While in the first period 28.98k ETH was paid as transaction fee. Users have paid an average of 0.0097ETH in the first period and 0.012ETH in the second period as their transaction fee.

Although the gas limit in 2023 has increased as we move forward, the amount of gas used in this period has had a downward trend with the passage of time. While in the first period, these trends are exactly the opposite. It seems that there is a relationship between ETH price and these two parameters

ETH Transfers | Ethereum Network <----> CEXs

Despite the downward trend and then the relative stabilization of the number of ETH transfers in the first period, we see an increase in the number of transfers in the second period compared to the first period.

Although there was no significant change in transfers from CEXs to the Ethereum network in two periods, and in the second period there were only 22.6k transfers. But in the transfers of ETH from the Ethereum network to CEXs, it can be clearly seen that with the increase in the price of ETH in 2023, we had much more transfers than in the first period. (about 464k)

In the first period, the number of ETH transfers from CEXs to the Ethereum network is 300k more than the number of ETH transfers from the Ethereum network to CEXs. While in the second period, the number of ETH transfers from the Ethereum network to CEXs is 141k more than the number of ETH transfers from CEXs to the Ethereum network.

As expected, Binance is the top source and destination of transfers among exchanges and holds the first rank in all parameters.

As for the number of ETH senders, to and from the Ethereum network, the shares and trends are very similar to the number of transfers, which is not far off.

But in the case of the amount of ETH transferred, the trends are very similar and the numbers are much closer, and here it does not seem that the price increase has had an effect on the amount of ETH transferred.

On January 5, the number of ETH transfers from the Ethereum network to the "Binance" exchange exceeded 423.3k. This number shows 62% compared to January 4. But interestingly, on this day about 200k ETH was transferred from Ethereum network to CEXs.

On January 8, the number of ETH transfers from the Ethereum network to the "Crypto.com" exchange was more than 331.5k. This number shows 13,730% compared to January 7. But it is interesting that on this day more than 320k ETH was transferred from Ethereum network to CEXs.

[Flash Bounty] - ETH Positive Price Action