On October 9, the Ethereum Foundation swapped 1,700 ETH for $2.74 million on Uniswap DEX. This happened against the backdrop of a decline in the price of ETH, both against the USD and BTC. Let's consider if it is worth panicling.
What is the Ethereum Foundation
The Ethereum Foundation (EF) is a non-profit organisation located in Switzerland dedicated to supporting Ethereum and related technologies. The Foundation’s role is not to control or lead Ethereum, nor are they the only organisation that funds critical development of Ethereum-related technologies.
According to EF's latest report as of March 31, the EF Treasury totalled $1.6B and consisted of:
🪙 80.5% of ETH ($1.294B or 0.297% of total ETH supply),
💵 18.8% of non-crypto assets and investments ($302M),
👛 0.7% of other crypto ($11M).
The balance history of one of the largest wallets owned by EF can be found here. At the moment, this wallet holds 316,273 ETH ($488M).
EF's portfolio can be viewed on the Arkham Intelligence platform.
Why does the Ethereum Foundation sell its ETH holdings
An address owned by EF and labelled on etherscan as "Grant Provider" swapped 1,700 ETH ($2.74 million) via Uniswap for about 2.74 million USDC at an exchange rate of $1.611. Now, 194 ETH ($300,000) remains the address.
The Ethereum Foundation needs money to operate, fund projects, make grants, and so on. According to EF's late March 2022 report, they also do this to increase their non-crypto savings in response to rising ETH prices. In other words, EF sells some of its reserves to mitigate risks during crypto market decline and to support the Ethereum ecosystem.
This Ethereum Foundation sale appeared to face a sandwich attack. The transaction was trapped between two other transactions that made the ETH rate slightly fall. As a result, the Ethereum Foundation lost $9K. Learn more: Ethereum Foundation loses $9K in sandwich attack during 1,700 ETH swap.
A few words about the difference between transfer on CEX and swap on DEX
The sale on a Centralised Exchange (CEX) is different from selling on a Decentralised Exchange (DEX). However, media and market participants always assume that a transfer to any exchange means sale.
Keep in mind that a transfer to CEX does not always mean a sale. In fact, no one knows exactly how the Ethereum Foundation disposes of its funds on CEX: whether it is to cause a panic and then get the coins back, withdraw to other wallets, etc.
In the case of DEX, there is no transfer of ETH; it is a direct swap, i.e. sale. By looking at the blockchain activity. we can find out the details of this sale. Nevertheless, its purpose is unknown. EF has not commented on it at this time.
Some past ETH sales from the Ethereum Foundation, or why you should stay calm
Such transfers often cause a minor panic in the market, which may lead to short-term price drops for ETH. However, this is not always the case. Below, we have highlighted a few of these transfers and their consequences for the value.
On May 6 of this year, EF made a transfer of 15,000 ETH to the Kraken exchange. On that day, the local high of the ETH price was $2,019, but a week later, the price ranged from $1,790 to $1,810.
On November 11, 2021, EF sent 20,000 ETH to Kraken. At the time, it was close to the peak of a bull run, with ETH value trading near $4,700. Around that time, the "crypto winter" started, and the price of ETH. as well as the whole crypto market, was declining.
However, such ETH sales by EF are not always followed by a price dump. There was a transfer of 100,000 ETH to Kraken on December 17, 2020.
On that day, the price of ETH was around $650. A month later, its value had already risen to around $1250.
Of course, EF can have a strong impact on the ETH price through their actions as a major player in the entire ecosystem. But it cannot be assumed that the Foundation sells ETH at a local high to intentionally drive the price down later. EF may simply need operational funds and sell ETH without any expectations.
Current ETH market condition
This autumn has not been favourable for the second-most-capitalised cryptocurrency. Since the beginning of the month, the price has fallen by 6.5%, and it currently stands at $1,550.
The ETH/BTC trading pair is also worth mentioning separately. A couple of days ago, the price hit its lowest point since July 15, 2022. In addition, the chart below shows an obvious downtrend since early September of that year, which coincides with the time Ethereum switched to Proof-of-Stake.
This suggests that in a challenging crypto market and the world in general, investors are preferring Bitcoin over Ethereum and other altcoins. This is confirmed by the fact that, in terms of capitalization as a percentage, BTC's share is 50%, and ETH's share is 17.8%, according to CoinMarketCap. Moreover, over the past year, BTC has grown by almost 40% from $19,000 to $26,800, while ETH has only grown by about 20% from $1,290 to $1,550 over the same time.
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