The year 2023 has witnessed a notable stagnation in the number of active ERC-20 addresses, according to data from Etherscan. These addresses have remained within the range of 200,000 to 300,000, presenting little change despite fluctuations in Ethereum prices. As of August 2, approximately 275,000 active ERC-20 addresses were recorded, indicating a modest increase from the 156,000 observed on June 18. However, it is worth noting a significant surge in activity on June 11, with over 446,000 active ERC-20 addresses reported.
The Impact of Ethereum Price Fluctuations
The trajectory of Ethereum’s price has been tumultuous, mirroring the activity pattern of ERC-20 addresses. Despite bullish attempts, Ethereum has struggled to surpass the $2,100 liquidation level seen in the latter stages of H1 2023. Currently hovering around the $1,800 range, Ethereum prices appear precarious and susceptible to a decline based on the candlestick arrangements in the daily chart. A significant drop below the $1,800 level could potentially signal a shift towards a bearish trend in the medium term.
The lower number of active ERC-20 addresses indicates a decreased demand for Ethereum (ETH), a cryptocurrency used for transaction fees. Consequently, there is reduced competition for block space and subsequently lower gas fees. This typically encourages greater participation and the deployment of complex contracts in decentralized finance (DeFi). However, the current trend suggests waning interest in DeFi activities, leading to decreased network activity and lower gas fees.
The introduction of EIP-1559 has had an impact on Ethereum’s network activity. With low activity, fewer coins are being taken out of circulation. This effectively hampers the deflationary effects intended by EIP-1559. Despite the reduced network activity, each validated block continues to generate two ETH, diluting the deflationary mechanisms.
Decline in DeFi Interest
The declining activity in ERC-20 addresses can be partially attributed to the waning interest in DeFi activities. As of August 2, the total value locked (TVL) remains below $50 billion, with a significant portion of assets tied to Ethereum. Notable DeFi projects such as LidoDAO, Curve, and Uniswap facilitate the trading of ERC-20 tokens.
USDT: The Most Actively Transacted Token
On-chain data reveals that the most actively transacted token within the ERC-20 ecosystem is USDT. Given its status as the third-largest coin by market capitalization and its widespread use on both Ethereum and Tron networks, this trend is not surprising.
Stable On-Chain Activity Despite Price Volatility
Despite the price volatility experienced by Ethereum between June and July, the on-chain activity for ERC-20 tokens remained relatively stable. Transfers continued to occur consistently, even during temporary price increases. Although Ethereum prices rose from $1,630 to $2,000 during this period, the current price sits lower. It remains unclear whether there will be a change in activity as the prices continue to decline. However, the decrease in prices may compel token holders to adopt a wait-and-see approach, resulting in decreased activity.
The Ethereum network has been facing a decline in activity in 2023, reflected in the stagnant number of active ERC-20 addresses. The price fluctuations of Ethereum, along with decreasing interest in DeFi activities, contribute to this trend. However, stable on-chain activity and the prominence of USDT within the ERC-20 ecosystem indicate that there is still significant potential for growth and development within the Ethereum network.