ETH Dominance, Mining Activity, & OpenSea's Recovery

DEC 13, 2021 • 4 Min Read

Joo Kian

DISCLOSURE: DELPHI VENTURES HAVE INVESTED IN BTC AND ETH. MEMBERS OF OUR TEAM ALSO OWN BAYC AND MAYC. THESE STATEMENTS ARE INTENDED TO DISCLOSE ANY CONFLICT OF INTEREST AND SHOULD NOT BE MISCONSTRUED AS A RECOMMENDATION TO PURCHASE ANY TOKEN. THIS CONTENT IS FOR INFORMATIONAL PURPOSES ONLY AND YOU SHOULD NOT MAKE DECISIONS BASED SOLELY ON IT. THIS IS NOT INVESTMENT ADVICE.

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ETH Dominance on the Rise

  • ETH and BTC have both performed well in 2021. However, as the year went on ETH edged out BTC, as reflected by market cap dominance. ETH’s dominance went from ~11% at the start of the year to ~21% today. BTC dominance on the other hand started at ~73% and is at ~42% today.
  • 2021 has been the year of smart contracts, with several new chains gaining meaningful traction. Further, ETH and altcoins tend to outperform BTC when the market is optimistic. This causes BTC to lose market dominance as growth lags that of other coins.
Bitcoin Mining Activity Recovers

  • When China banned cryptocurrency mining, BTC difficulty and hash rate plummeted as mining farms were forced to close. The ban had severe implications for the overall Bitcoin network, as 50% of the network’s hash rate was removed as it swiftly dropped from ~180M TH/s to ~85M TH/s.
  • Mining farms were largely relocated to regions like Kazakhstan and the USA, making both of these countries home to the largest mining operations.
  • Despite the quick drop, the recovery was steady. Bitcoin is back at its prior hash rate high of ~180M TH/s less than five months after China’s ban. Kazakhstan seems to have been affected by a power shortfall caused by crypto mining farms, so it remains an open question whether mining can sustainably occur in the region.
Miners Unfazed by ETH 2.0 Upgrade

  • ETH suffered a similar fate as BTC when Chinese mining farms were shut down. However, the Ethereum network recovered in just under 2 months — a far quicker trajectory than BTC. Surprisingly, Ethereum’s difficulty and hash rate continued to soar and doesn’t seem to be stopping.
  • ETH 2.0 will move Ethereum from a Proof-of-Work (PoW) network to a Proof-of-Stake (PoS) network. The upgrade is expected to be implemented by June 2022. The move from PoW to PoS removes the need for large-scale miners and GPUs and shifts the process to stake-based validation.
  • Consequently, the growth in hash rate might seem counterintuitive at first given that ETH 2.0 is approaching and miners’ revenue will be heavily affected. However, there’s a good reason for that. Miners now collectively mint ~13,000 ETH per day, at today’s price of $4,000, that’s roughly $52M. With the remaining 6 months, there is still ~$9.36B ($4000 x 13,000 ETH x 180 Days) on the table to be earned by miners till ETH 2.0 goes live.
OpenSea’s Recovery

  • OpenSea volume has been recovering steadily over the past month. Random NFT mints seem to be slowing down, which translates to fewer “cash grab” NFTs in the market.
  • Recent volume has been driven by higher-quality NFTs, which include:
    1. BAYC and MAYC are continuing to gain traction due to multiple celebrity purchases as well as partnerships, most noticeably with Adidas Originals.
    2. RTFKT – CloneX, in partnership with Takashi Murakami. Their NFT was just revealed yesterday and has greatly contributed to the recent volume.
    3. Metaverse Real Estate on Sandbox also benefited from their Adidas Originals partnership.
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