Insight into the unique use cases of the three major mainstream crypto assets from transaction volume

Insights from transaction volume use cases that drive the price growth of Bitcoin, Ethereum, and stablecoins.

Source: chainalysis blog

Compilation: Chen Yiwanfeng

With the bull market driven by the end of 2020, the global market value of encrypted assets has soared. Bitcoin once exceeded $60 million, standing on a new historical level. According to the Ou Yi OKEx market, the highest price of Bitcoin in this bull market reached 64,846 US dollars, and Ethereum was not to be outdone, winning an excellent result of 4,371 US dollars.

Although the overall performance of crypto assets in terms of price is obvious to all, many people still don’t understand the true diversity of cryptocurrencies as an asset class and how each mainstream token takes advantage of its unique use cases. To promote its growth. Looking at all cryptocurrencies in the first quarter of 2021, the four categories of stablecoins, Ethereum, WBTC and Bitcoin together constitute the majority of cryptocurrency trading volume.

Coin World-Insight into the unique use cases of the three major mainstream crypto assets from transaction volume

Among them, the transaction volume of stablecoins is US$869 billion, and the transaction volume of Ethereum is US$840 billion, ranking second; the transaction volume of wETH, which belongs to the same category of Ethereum, is US$635 billion, ranking third; and the transaction volume of Bitcoin is US$623 billion. Fourth place. Next, the ostrich blockchain will conduct a detailed analysis of the three categories of Bitcoin, Ethereum and stablecoins to gain insights into their unique use cases. The following content is from the chainalysis blog, compiled by the ostrich blockchain.

Bitcoin: Crypto Gold, a long-term investment asset in the crypto world

According to relevant data, investors mainly hold Bitcoin as a long-term investment. First, we first subdivide wallet types that hold Bitcoin wallets and wallets that hold other assets. 

1. Investors: Self-custodial wallets with 75% or more of the value of cryptocurrencies

2. Trader: Self-custodial wallets that own less than 75% of the value of all cryptocurrencies

3. Services: Wallets hosted by services such as exchanges 

Coin World-Insight into the unique use cases of the three major mainstream crypto assets from transaction volume

Please note that this chart does not include cryptocurrencies classified as potentially lost, which means that it has not been removed from the current wallet in 5 years or more.

From the above chart, we can see that 73% of Bitcoin is held by investors, while Ethereum is only 58%. The mainstream stable currency USDT_ETH is 43%, which is the ERC-20 token version of Tether. At the same time, only 7% of Bitcoin is held by traders who tend to seek short-term gains by trading between a wider range of assets, compared to 18% for Ethereum and 14% for USDT_ETH. 

When we delve into the average “age” of each coin, the use case of Bitcoin as a long-term investment becomes clearer, which means the length of time it has been in the current wallet.

Coin World-Insight into the unique use cases of the three major mainstream crypto assets from transaction volume

Please note that the above image only shows the assets in the self-custodial wallet, not the assets in the wallet connected to the service.

From the above chart, we have got amazing data. The average Bitcoin held in self-custodial wallets was acquired about 150 weeks ago, compared to 75 weeks for Ethereum and 6 to 7 weeks for mainstream stablecoins Tether and USDC. In other words, cryptocurrency users hold bitcoins for about twice as long as Ethereum and more than 20 times longer than stablecoins. 

But who are these long-term Bitcoin investors? Below, we will investigate who is using different types of cryptocurrencies based on the size of the transaction, and use it to classify the users behind the transaction.

Coin World-Insight into the unique use cases of the three major mainstream crypto assets from transaction volume

Note: We define institutional transfers as transfers above USD 1 million, professional transfers as transfers between USD 10,000 and USD 1 million, large retail transfers as transfers between USD 1,000 and USD 10,000, and small retail transfers as under 1,000 USD. The transfer of US dollars.

The data shows that, depending on the scale of individual transactions, institutional investors may account for 69% of all Bitcoin transactions during the research period.

Taken together, these data are largely consistent with what we have heard in the past year: investors, especially those of mainstream financial institutions, have regarded Bitcoin as a long-term investment, and many people Position the asset as a hedge against inflation and other worrying economic trends. This is why compared with other cryptocurrencies, we see that Bitcoin has been held for so long, and the scale of transactions held by Bitcoin investors is so large, indicating that they are at the professional or institutional level.

Ethereum: The value is impressive, and it is expected to surpass Bitcoin

It is worth mentioning that, despite the low market value of Ethereum and the low frequency of media reports, the transaction volume of Ethereum in the first quarter of 2021 is still higher than that of Bitcoin. 

Coin World-Insight into the unique use cases of the three major mainstream crypto assets from transaction volume

In fact, if we Ethernet Square, trading volume and wETH (its ERC-20 tokens equivalent) trading volume combine Ethernet Square will have by far the highest of all encrypted currency trading volume. 

But which services are responsible for these Ethereum transactions?

Coin World-Insight into the unique use cases of the three major mainstream crypto assets from transaction volume

Note: This picture only reflects transactions involving services, not transactions between self-custodial wallets

Since January 2020, most Ethereum transactions involve at least one DeFi platform, and most of them occur between the two DeFi platforms. The DeFi platform is a cryptocurrency service built on a blockchain rich in smart contracts. Once constructed, they can run autonomously and automatically perform specific financial functions—transactions, loans, or other transactions—when specific conditions defined by the underlying code are met. Therefore, the DeFi platform can exist independently of the company or other governance institutions. 

Most importantly, almost all DeFi platforms are built on the Ethereum blockchain, which means that they mainly accept Ethereum and ERC-20 tokens, and ERC-20 tokens are built on the Ethereum blockchain. Cryptocurrencies, which means they can be sent and received from Ethereum wallets. Many ERC-20 tokens are designed to reflect the price of existing assets. For example, wBTC is an ERC-20 token that matches the price of Bitcoin, and wETH implements the same function for Ethereum. USDT_ETH and USDC_ETH match the prices of stablecoins Tether and USDC respectively, both of which are pegged to the U.S. dollar.

Coin World-Insight into the unique use cases of the three major mainstream crypto assets from transaction volume

The growth of DeFi is a relatively new development. In June 2020, the total weekly value of the DeFi platform will be between US$2 and US$3 billion. This number began to grow rapidly in August, and as of May 2021, it continued to exceed US$20 billion a week, and sometimes even exceeded US$60 billion.

Coin World-Insight into the unique use cases of the three major mainstream crypto assets from transaction volume

Since the beginning of 2020, DeFi has been by far the fastest growing service category, almost all driven by Ethereum. In this case, Ethereum plays a key role in cryptocurrency innovation because DeFi is a development site for several new financial services and tools, including NFTs, decentralized exchanges, and automated lending platforms.

DeFi also provides a way for cryptocurrencies to enter the community to launch new platforms. The founders of traditional centralized exchanges and other services usually have to raise funds themselves to build a new platform and provide it with initial liquidity. With DeFi, founders can borrow funds from users or other supporters. In return, these people will get unique tokens related to the platform and thus have the right to share the platform’s fees. We expect more innovations in DeFi in the next few years, most of which may be supported by Ethereum.

Stable currency: anchoring fiat currency, the profit conversion bridge of encrypted assets

Stable currency is a cryptocurrency linked to the price of existing non-crypto assets. Two of the most popular stablecoins are USDT and USDC. According to data, the transaction volume of stablecoins is higher than that of Bitcoin and Ethereum, but where are these transactions happening? Let’s take USDT as an example.

Coin World-Insight into the unique use cases of the three major mainstream crypto assets from transaction volume

Note: This picture only reflects transactions involving services, not transactions between self-custodial wallets

The data shows that most of the USDT transactions are carried out between exchanges, especially C2C exchanges, which means that those who only allow users to exchange cryptocurrencies for other cryptocurrencies, not legal currencies. This reflects the key role that stablecoins play in the trade settlement of exchanges, especially C2C exchanges. Due to its stability, stablecoins allow traders to lock the value of their cryptocurrency into U.S. dollars, thereby shielding themselves from cryptocurrency fluctuations without having to move their funds out of the exchange. 

This role makes stablecoins the most frequently traded asset in the cryptocurrency ecosystem. Keep in mind that most transactions occur on a single exchange, which is not shown in the on-chain transaction volume data. We can use order book data to compare the transaction rates of different cryptocurrencies after they arrive at the exchange, using a metric called transaction strength. Transaction strength measures the number of transactions between tokens being deposited on the exchange and withdrawal.

The following is a comparison of the trading strength of the stable currency USDT, Bitcoin and Ethereum.

Coin World-Insight into the unique use cases of the three major mainstream crypto assets from transaction volume

Although the trading intensity has dropped and flowed over time, given that traders often exchange other cryptocurrencies for stablecoins to store funds in more stable assets, the trading intensity of stablecoins in most months highest.

Interestingly, stablecoins are also often used for commercial transactions, especially in China and regions where Chinese businessmen conduct business abroad. For this purpose, the reason why stablecoins are so popular is largely due to its stability and its use as an alternative to the US dollar outside the traditional financial system.

to sum up

According to on-chain analysis, the market for encrypted assets is larger than any asset or investment strategy, and there are well-defined use cases for each of the most important and widely used encrypted assets.

1. Bitcoin as a long-term investment;

2. Ethereum is traded more frequently and used to power the innovative new DeFi platform;

3. Stable currency is the most frequently traded currency, serving as a settlement system and stable storage source for traders.

Each asset plays a key role in the broader cryptocurrency ecosystem. As the ecosystem continues to evolve, new tokens may emerge to solve new use cases, and the utility of existing tokens will also change.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/insight-into-the-unique-use-cases-of-the-three-major-mainstream-crypto-assets-from-transaction-volume/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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