Research Study
Q4 2023 Signals Report
A quarterly breakdown of key market metrics that could be impacting price and investor sentiment
by Fidelity Digital Assets
February 7, 2024 • 30 min read
As of the end of Q4 2023, the data suggests an overall positive outlook for both bitcoin and ether in the short- and long-term.
Bitcoin ended 2023 up 154% and has broken back above many short- and long-term indicators at the time of writing. The high fee environment promises increased revenue that miners are taking advantage of as they prepare for the next Bitcoin Halving, an event that is expected to programmatically occur in April 2024 and will reduce the block subsidy by half.
We also continue to see bitcoin leaving exchanges as the market approaches a 30% reduction from the exchange supply peak in 2020. The reduction in supply on exchanges will be a key metric to watch in 2024 and highlights the importance of other custody options, such as self-custody, or the use of a regulated third-party custodian, such as Fidelity Digital Assets℠.
Ether, up roughly 90% year-to-date, has also seen short-term positive price signals and growing on-chain metrics. The network continues to maintain a higher rate of burn than issuance, resulting in nearly 311,000 ether being removed from the network since The Merge’s implementation in September 2022. However, we have seen a significant slowing of ether being staked over the past quarter that may signal we are approaching a “terminal” staking percentage.
Uptake of Layer 2 platforms in 2023 was remarkable and is the first clear signal that Ethereum’s rollup-centric roadmap could be successful in years to come. The next upgrade, occurring in early 2024, could further accelerate adoption of Layer 2 platforms by substantially lowering fees for users.
Overall, the slowing growth of staked ether, adoption of Layer 2’s, and sustained base layer usage all point to a healthy Ethereum ecosystem in 2024.
Read more to learn what metrics we are watching and what they may be telling us.
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