Ethereum’s L2 Surge and Bitcoin’s Miner Exodus: Key On-Chain Trends in Q2 2024

• Bitcoin’s halving in April reduced its issuance rate, yet prices declined as long-term holders took profits.
• Ethereum ETFs approved by the SEC boosted prices, reflecting strong long-term investor confidence.
• Government Bitcoin sales and miner sell-offs contributed to Bitcoin’s price drop during the quarter.

The second quarter of 2024 brought about substantial changes in the crypto market. Bitcoin and Ethereum experienced price declines despite major events, including Bitcoin’s halving and the approval of Ethereum ETFs. Crypto prices struggled, with Bitcoin falling 12.8% and Ethereum 3.1%. Here’s an analysis of key on-chain developments for Bitcoin and Ethereum during this quarter.

The Bitcoin halving on April 20 reduced its annual issuance rate from 1.7% to 0.85%. However, Bitcoin’s price continued its downward trend. The halving was likely already factored into the price, with Bitcoin reaching an all-time high prior. Long-term holders took profits, contributing to the price decline. These holders sold 160,000 BTC in May, equivalent to about $10 billion. In June, the selling rate slowed, with only 40,000 BTC sold.

Bitcoin miners also significantly reduced their reserves , selling over 30,000 BTC since June. The halving reduced miners’ margins, prompting this sell-off. Additionally, Bitcoin’s hash rate decreased by approximately 15% over the last month.

Moreover, government actions impacted Bitcoin’s price. The German government sold 6,500 BTC, valued at $420 million, and the US government transferred $240 million of Bitcoin tied to the Silk Road to Coinbase, suggesting potential sales.

Ethereum saw a different trend post-ETF approval. The SEC unexpectedly approved spot ETH ETFs, despite a less than 20% probability of approval. Following this, Ethereum’s price increased by over 10%. ETFs are expected to launch by July 7. Notably, 78% of ETH is held by long-term investors, showing strong confidence in the asset. About 28% of the supply is staked, and restaking accounts for nearly 5% of the supply.

Layer 2 (L2) transactions on Ethereum quadrupled over the year, especially on Arbitrum, Base, and Optimism. The integration of EIP-4844 in March reduced transaction fees by over 10 times. Coinbase’s L2 Base led in transactions, surpassing Optimism and Arbitrum. However, the shift to L2s led to a decline in ETH spent on fees and burning.