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Blockchain Analysis: Crypto Demand Down 46%

Last updated 10th May 2022
Disclosure

The crypto industry has blasted into the mainstream as Bitcoin and Ethereum have hit new all-time highs and even memes such as Dogecoin have featured alongside Elon Musk on prime time television.

More recently, crypto prices have fallen in line with the wider global markets as inflation and the Russia-Ukraine crisis continue to be a source of uncertainty for traders around the world.

Our previous research showed that interest in crypto-related terms has tanked on Google in recent times, even more so than prices.

We at the Bankless Times decided to dig into the blockchain itself to see how activity within the crypto space has been impacted as well.

We focused on the Ethereum blockchain which is the largest smart contract platform in the market.

Here’s what we found.

Daily Number of Unique Addresses Drops Amid Declining Interest in Crypto

As the title suggests, the daily number of unique addresses looks at the number of wallets on Ethereum which have been active in the past 24 hours.

In this case, activity refers to the process of sending or receiving tokens on the network.

Looking at the chart, there is a clear peak in May 2021 which is when Ethereum (ETH) hit an all-time high and then later crashed down after China announced a crypto ban.

Since then, the number of active addresses on Ethereum has been in a downtrend, despite Ethereum’s price recovering in the months that followed.

This may be as a result of alternative blockchains such as Solana and Avalanche becoming increasingly popular due to them offering cheaper and faster transactions than Ethereum.

In times when the Ethereum blockchain is congested, transaction fees also known as gas fees, can reach hundreds of dollars which can price out many users.

Gas Fees Plummet as Demand Falls

Gas fees are payments made by users to have their transactions processed on the blockchain.

In times when the network is in high demand, such as during big NFT drops or intense token sales, users typically bid up the price they are willing to pay to have their transactions processed as quickly as possible.

This can lead to huge spikes in gas fees which is seen on the chart.

Conversely, when activity dies down, so does the amount of gas needed to process transactions and this is what we can see rather clearly on the chart since March, albeit with some surges along the way.

This trend also aligns well with our previous findings for both NFT marketplace metrics and crypto-related search terms on Google.

Daily Transactions Have Fallen Significantly Since Peak

Looking at the chart, the number of daily transactions on Ethereum peaked in May as well, just days before the market crashed.

Daily transactions hit 1,716,600 on May 9th and has now fallen to around 1,236,000 in March 2022.

This represents a fall of around 28%

In total, it seems that activity on Ethereum has fallen by 46% on average when adding these figures together. This falls in line with the broader market's recent price action which may imply an approaching bear market.

Khashayar Abbasi

Khashayar Abbasi

Khashayar discovered Bitcoin back in 2014 and has since spent countless hours researching the different use cases of cryptocurrencies. He has a bachelor's degree in International Relations and has been a writer in the financial services industry for nearly half a decade. In his spare time, Khashayar enjoys photography, cycling, and ice skating.