The “Hodler Ratio” chart indicates that the percentage of Ethereum holders committed to holding their assets for the long term has seen a steady increase, now surpassing that of Bitcoin. This metric is crucial as it demonstrates the trust that investors place in the network’s future.
Ethereum’s ability to surpass in the percentage of long-term holders can be attributed to several factors. The continuous development of the Ethereum network, including the new road map and the growing ecosystem on Layer 2 networks, boosted investor confidence. Furthermore, the majority of investors believe that Ethereum is still lagging behind and has not yet shown its true market potential.
However, a high percentage of long-term holders can present a double-edged sword for a network’s performance. While it indicates trust and a long-term vision, it can also lead to reduced liquidity and potentially hinder short-term price performance. In the accumulation phase, this is typically seen as positive; it suggests that investors are accumulating and holding, which could drive up prices in the future due to reduced supply.
Despite this positive sentiment among holders, price performance is still trailing behind some of its peers. This may be due to a variety of factors, including market cycles and the broader economic environment affecting risk assets.
Yet, the traction on Ethereum’s Layer 2 networks provides a silver lining. The increase in activity and the scaling solutions offered by these networks are enhancing Ethereum’s usability and could serve as catalysts for future growth. The rise of Layer 2 solutions is key to Ethereum’s ability to handle increased transaction throughput, reduce fees and improve the overall user experience.
This article was originally published on U.Today
Source: Cryptocurrency - investing.com
