Ethereum’s record number of hodlers downgrades Bitcoin to second place

  • 2024-01-23

Comparisons between Bitcoin and Ethereum have made the topic of many crypto debates, leading to many different conclusions. Bitcoin is the holder of many notable records and achievements, including being the first decentralized cryptocurrency established by Satoshi Nakamoto in 2009, the most valuable digital asset and the one that occupies the largest share in the cryptocurrency market. As a result, Ethereum, which was founded in 2015 by Vitalik Buterin, has always lived in Bitcoin’s shadow, alongside all the other digital currencies that emerged in its wake, forming the altcoin pack.  

Historical cryptocurrency data reveals that the two assets have moved in tandem, with the flagship crypto dictating the price trajectory. Judging by the difference between the current Ethereum price and the Bitcoin price, the latter wins by a landslide. Ethereum always seems to be several steps behind Bitcoin, unable to pose a real threat to its dominance and yank it off its throne. 

However, if we delve a bit deeper, we can see that the altcoin leader also showcases a series of strong suits and key metrics that place it at the top of the cryptocurrency hierarchy, in front of its longtime rival, and hodler count is one of the areas where Ethereum excels.  

Ethereum hits record number of hodlers in 2023 

2023 has been a good year for Ethereum for several reasons. The second-ranked crypto has been on an appreciation journey for the better part of the year, with a 20% gain in the last month and a 38% gain over the past 60 days. Apart from the considerable price increase, Ethereum has also seen a significant surge in hodler numbers. 

Hodler is a popular crypto slang term that designates long-term holders of a cryptocurrency. These investors buy and hold onto assets regardless of price volatility, trusting their long-term value and their ability to weather market fluctuations.  

According to IntoTheBlock data, addresses that have held Ether for more than 12 months currently make up 72% of all Ethereum holders, reaching the highest level since 2018. At the moment, Ethereum counts approximately 73.9 million long-term holders, after a 44.2% increase, while Bitcoin’s holder figures stand at 33.6 million.  

Hodlers play an important role in the health and performance of digital assets. Coins backed by a large number of holders tend to be less susceptible to market volatility and are generally perceived as more resilient and trustworthy. So, the fact that Ethereum’s holder community is growing is certainly a positive development for the network. 

In addition, Ethereum also outclasses Bitcoin in terms of whales, which refers to persons or entities that own a large amount of a single cryptocurrency, between 1000 and 10,000 coins. By the latest count, the number of Ethereum whale addresses has recently reached 5,370, marking a 12% yearly increase, while Bitcoin whale wallets amount to 1,920. 

This proves that Bitcoin is not the only coin boasting record-breaking performances in the cryptocurrency ecosystem. Ethereum outshines the original crypto in many ways, so even though there’s still a huge price discrepancy between the two, the top altcoin continues to attract an increasing number of investors

What prompted Ethereum’s holder increase?

Not too long ago, Bitcoin used to hold supremacy in hodler numbers as well. What’s more, both Bitcoin and Ethereum have had impressive runs this year and recorded increases in their hodler metrics. So, what exactly caused the tables to turn and lead to such a notable disparity between the two assets?  

Ethereum’s surge in long-term holders can be attributed to a series of factors. One of the most likely causes for the increase is the rise in Ethereum staking registered this year. The amount of staked Ether has nearly doubled since the beginning of 2023, with roughly 24% of all Ethereum’s circulating supply being locked in staking deposits. Since most staked funds remained untouched for more than 12 months, this led to a major rise in the Holder Ratio. 

However, there are other factors that have contributed to the phenomenon which have to do with the purpose and the evolution of the two crypto projects. On one hand, Bitcoin has continued to operate as a deflationary store of value and a peer-to-peer form of digital money, so it hasn’t strayed away from its original purpose and use cases. 

On the other hand, Ethereum has undergone massive transformations since its launch back in 2013. Designed by Vitalik Buterin as a programable blockchain, Ethereum started its journey as a platform that enables the deployment of decentralized apps (dApps). However, over the years and after multiple upgrades and updates, the Ethereum ecosystem expanded considerably, with applications and use cases spanning across many other areas, including gaming, decentralized finance (DeFi), and non-fungible tokens (NFTs).

Bitcoin is clearly more established and mainstream than Ethereum, having a longer track record in the market and being superior in terms of price performance and scalability. Ethereum is in a weaker position from this point of view, but price action is not the only aspect that attracts investors and drives crypto adoption. 

The fact that Ethereum boasts a diversity of use cases and represents a hub for innovation in the crypto sphere has caught the eye of stakeholders and that has led to an increase in hodler numbers. 

The Ethereum network also seems to respond better to the changing needs and demands of market participants. The Merge and Shapella upgrades, which saw Ethereum switch from a proof-of-work (PoW) consensus protocol to a proof-of-stake (PoS) mechanism, stand as proof of Ethereum’s adaptability, flexibility and its constant focus on innovation. These attributes have turned it into a decentralized blockchain powerhouse and continue to draw in more investors and holders. 

Final thoughts 

Ethereum’s record number of long-term holders might not be enough to steal the leader position from Bitcoin, so it’s rather premature to make assumptions about a potential flippening in the near future. However, changes in this key metric serve as an indicator of Ethereum’s strength and potential and are worth taking into account by crypto enthusiasts.