Small Ethereum investors increase exposure as ETH loses $4K level

Ethereum's native token Ether (ETH) has dropped by over 18% after establishing an all-time high around $4,867 on Nov. 10, now trading near $3,900. Nonetheless, the plunge has not deterred retail investors from buying the token in small quantities.

According to data gathered by Glassnode — a blockchain analytics platform, the number of Ether addresses holding less than or equal to 0.01 ETH reached a record high level of 19.95 million on Dec. 4, the day ETH dropped to as low as $3,575 (data from Coinbase).

Meanwhile, the number of Ethereum wallets with balances of at least 0.1 ETH also kept climbing despite Ether's correction from $4,867 to $3,575, eventually hitting a new all-time high of 6.37 million on Dec. 12.

As a result, the number of Ether addresses with a non-zero balance also reached a new record high of nearly 70 million on Dec. 12. In contrast, addresses holding less than or equal to 1 ETH dropped alongside prices, indicating that they were less interested in buying Ether's sessional dips.  

Bounce ahead?

The army of retail investors buying Ether in small quantities marches ahead as the ETH price drops toward a support confluence.

Notably, Ether plunged Monday by over 5% to near $3,900 in a selloff inspired by similar corrections across the cryptocurrency space. Nonetheless, ETH price reached an area that has been lately attracting buyers.

The first support came from the lower trendline of the descending channel pattern — the blacked range shown in the chart above. Meanwhile, the purpled 100-day simple moving average (100-day SMA) and the red pullback area — as it has been since Oct. 20 — raised Ether's potential to retrace upward in the near term.

While smaller retail investors seem to have been accumulating Ether, their larger counterparts look conflicted.

For instance, Glassnode data shows a marginal recovery in the buying interest by the Ethereum wallets with balances of at least 1,000 ETH. Still, overall, their numbers have gone down from near 7,200 to below 6,350 in 2021.

Exchanges' Ether balances

More upside cues come from Ether's declining balances across all the crypto exchanges.

The number of coins held by exchanges recovered from nearly 14 million ETH to 14.13 million ETH since Dec. 9 — which coincided with an almost 10.50% price drop — but its long-term trend remains skewed to the downside.

A lower ETH balance across exchanges hints at traders' intention to hold their coins or stake them in the pools of decentralized finance (DeFi) projects to earn yields instead of trading them for other assets.

Related: Data shows pro traders are currently more bullish on Ethereum than Bitcoin

DeFi's total value locked (TVL) sits at a new all-time high above $250 billion, according to data provided by Defi Llama, out of which Ethereum's TVL came out to be over $180 billion.

"However, Ethereum's dominance over DeFi activity has taken a big hit in H2 2021," reminded Delphi Digital, a crypto-focused investment firm, adding that:

High gas fees have been the main reason behind investors seeking potential "Ethereum killers."

For instance, a decentralized exchange swap costs $70 on Ethereum but $1 on Terra and Solana. Though, some analysts anticipate that Ethereum's full transition from proof-of-work to proof-of-stake next year would solve the high gas problem.

"Ethereum's price will rise at a much faster rate than bitcoin, due to the move to proof of stake," noted Tom Higgins, CEO at asset management platform Gold-i.

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