Investor Nets $131 Million Profit from Ethereum Bear Market Hold

Ethereum has seen a notable shift in network dynamics, with rising transaction fees and increasing activity from large investors. At the start of September, average transaction fees dipped below $1 for the first time in over four years, only to triple within weeks, signaling renewed demand on the network. Meanwhile, an Ethereum investor, who held through the 2022 bear market, has made a significant $131.72 million profit.

Cryptocurrency Investor Turns $131.72 Million Profit Holding Ethereum Through Bear Market

A cryptocurrency investor has made an impressive $131.72 million profit by holding Ethereum (ETH) through the turbulent 2022 bear market. The strategy, often referred to as having “diamond hands,” involves holding onto investments despite extreme market volatility and uncertainty, with the aim of reaping long-term gains. Blockchain analytics firm Lookonchain identified this investor’s impressive success, showcasing the potential rewards of a steadfast hodl (hold on for dear life) approach in the cryptocurrency space.

The investor’s journey began in early September 2022, when Ethereum was priced at approximately $1,567. During this time, the crypto market was deep in bear territory, with many investors losing confidence amid sharp declines in asset prices. The investor, however, took the contrarian approach and purchased 96,639 ETH across several transactions through the Coinbase exchange on Sept. 3 and 4, 2022. This bold move amounted to an initial investment of $151.42 million.

For two years, the investor held onto the ETH tokens despite the market’s significant fluctuations. This holding strategy paid off handsomely as the price of Ethereum rebounded in the subsequent years.

Profiting from the Long-Term Hold

Fast forward to March 2024, when the price of Ethereum had risen to $3,062. At this point, the investor decided to cash in on part of the holdings, transferring 70,000 ETH—more than 72% of the original purchase—to the Kraken crypto exchange. This move represented a staggering $214.34 million worth of Ethereum at the time, securing a substantial profit of $62.92 million from just this portion of the holdings.

Despite selling the bulk of the investment, the investor has continued to hold onto 26,639 ETH, which is currently valued at $68.81 million, adding up to a total profit of $131.72 million across the entire venture.

This investor’s experience demonstrates the power of holding during tough market conditions, a strategy that stands in stark contrast to panic selling, which often leads to significant long-term losses. The story offers an invaluable lesson for cryptocurrency investors about the rewards of patience and a buy-the-dip mindset.

“Diamond hands” has become a popular phrase in the cryptocurrency and broader financial community, representing individuals who refuse to sell their assets despite market volatility. These investors are often contrasted with “paper hands” traders, who sell at the first sign of a downturn, frequently locking in losses rather than waiting for a market recovery.

The practice of holding onto crypto assets through challenging market conditions is not new. As evidenced by this Ethereum investor, it can yield significant profits for those willing to endure the uncertainty. Lookonchain emphasized the long-term losses associated with panic selling while highlighting the benefits of the diamond hands strategy.

In addition to this Ethereum success story, other diamond hands investors have made waves in the cryptocurrency community by holding onto meme coins such as Shiba Inu (SHIB) and Pepe (PEPE).

Lookonchain also recently reported another impressive profit made by a Shiba Inu (SHIB) investor who turned a $2,625 investment into a $1.1 million windfall after holding for 3.5 years. This particular trader bought 48.09 billion SHIB on Feb. 1, 2021, when the token was largely flying under the radar. Despite market fluctuations and the emergence of new trends, the investor continued to hold the position, finally selling the tokens for 278.7 ETH, worth approximately $1.1 million. This trade marked a remarkable 419x gain.

Similarly, another savvy trader profited immensely from the resurgence of the meme coin Pepe (PEPE), turning an initial investment of $3,000 into an eye-popping $46 million. The rise in Pepe’s price was driven, in part, by the reemergence of the GameStop trading frenzy, which also had a significant impact on certain memecoins.

Lessons for Crypto Investors

The stories of these diamond hands investors bring attention to the importance of patience and confidence in one’s investment strategy, even during times of market turmoil. While cryptocurrencies are inherently volatile, history shows that those who resist the temptation to panic sell often come out ahead in the long run. 

For investors new to the crypto space, these tales of success serve as a reminder of the potential rewards of a long-term strategy, though it’s also crucial to understand the risks. While diamond hands can lead to significant gains, the volatile nature of cryptocurrencies means that investors must also be prepared for downturns.

However, the ethos of “buying the dip” and holding through rough patches has, time and again, proven to be a successful strategy for many in the crypto world. The Ethereum whale’s $131.72 million profit is a prime example of how a calculated long-term approach can yield astronomical returns.

As the cryptocurrency market continues to evolve, the role of diamond hand investors remains crucial. Their actions not only affect individual profits but also contribute to the overall market sentiment, often stabilizing prices by reducing panic selling.

Whether it’s holding major assets like Ether or diving into high-risk, high-reward meme coins like SHIB and PEPE, investors with diamond hands will continue to be a defining force in the crypto world. As market conditions fluctuate, the success stories of these investors provide inspiration—and a cautionary tale—for those looking to navigate the ever-changing world of digital assets.

Ethereum Transaction Fees Surge Amid Network Activity and Falling Active Accounts

At the start of the month, the average transaction fee on the Ethereum network dropped below $1 for the first time in more than four years, marking a significant milestone for the blockchain platform. This low, reminiscent of Ethereum’s pre-boom days before the rise of decentralized finance (DeFi), NFTs, and Ethereum’s monumental proof-of-stake (PoS) transition, hinted at a new era of affordability for users. However, the calm didn’t last long. By Sept. 21, the seven-day moving average transaction fee on Ethereum had more than tripled, soaring to $3.52. This rapid increase, coupled with a 1600% spike in Ethereum’s burn rate, reflects shifting dynamics within the network and highlights both opportunities and challenges.

The dip below $1 in transaction fees on Sept. 1 was a welcome change for many Ethereum users. Since July 2020, when Ethereum’s popularity began to skyrocket, transaction costs on the network had often been a barrier, especially during periods of high demand for DeFi and NFTs. The introduction of Ethereum’s PoS model with the Merge in 2022, and subsequent upgrades like Ethereum Improvement Proposal (EIP)-1559, promised to reduce costs and increase scalability. However, network congestion remained an ongoing issue as more use cases emerged, especially around NFTs, decentralized exchanges, and new blockchain applications.

The seven-day moving average transaction fee of $0.85 in early September reflected a period of low network activity. However, by Sept. 21, fees surged dramatically to $3.52—over triple the value recorded just three weeks prior. This upward trend in fees signals increased demand for Ethereum block space, indicating a resurgence in on-chain activity.

Ethereum’s fee spike has led to a proportional increase in the rate at which ETH is burned. With EIP-1559, introduced in August 2021, a portion of every transaction fee on Ethereum is removed (burned) from circulation, reducing the total supply of ETH over time. The burn mechanism is directly correlated with network usage: the more transactions that occur, the more ETH is burned.

On Sept. 1, 2024, Ethereum’s burn rate stood at a modest 80.27 ETH per day. However, with transaction fees skyrocketing, the burn rate exploded to 1,360 ETH per day by Sept. 21—a massive 1,600% increase in just three weeks. 

What’s Fueling Ethereum’s Activity?

At the core of the recent fee surge is the increasing popularity of various Ethereum-based applications. Uniswap, the leading decentralized exchange, along with its V2 variant, has consistently been one of the largest gas consumers on the network. This suggests that DeFi activity, especially trading and liquidity provision, continues to drive Ethereum’s transaction costs upward.

However, it’s not just traditional DeFi platforms that are fueling Ethereum’s resurgence. Telegram-based crypto and NFT trading bots, such as Maestro and Banana Gun, have also emerged as significant contributors to Ethereum’s gas consumption. These bots facilitate rapid trading and have become popular among speculators and traders in niche markets, adding another layer of activity to the already congested network.

Stablecoin transactions, particularly those involving Tether (USDT) and Circle’s USD Coin (USDC), also rank high among Ethereum’s gas-consuming transactions. Stablecoins are integral to DeFi and broader cryptocurrency markets, as they offer a stable medium of exchange and store of value. Their continued high usage on Ethereum shows the network’s centrality to the stablecoin ecosystem.

Despite the rise in transaction fees and burn rate, Ethereum has seen a notable decline in the number of active accounts. As of Sept. 21, the seven-day moving average of active accounts on the network fell to approximately 385,000—the lowest value recorded since December 2023. This marks an 11% decrease compared to the beginning of September.

The decline in active accounts may seem paradoxical given the surge in transaction fees, but it underscores the impact that rising costs can have on user behavior. Higher fees can deter smaller users and less frequent participants from interacting with the network, particularly when alternative blockchains offer lower-cost solutions. This decline in active users suggests that Ethereum may face competition from other layer-1 or layer-2 solutions that promise faster and cheaper transactions.

Market Sentiment and Ethereum’s Struggles

Ethereum’s recent market performance has been under scrutiny, with analysts and investors expressing mixed views about the blockchain’s future. One notable metric that has garnered attention is the ratio of Ethereum’s market cap to Bitcoin’s. As of last week, Ethereum’s market cap ratio relative to Bitcoin’s hit its lowest level since 2021 before recovering slightly. This indicates that Ethereum, despite its central role in the DeFi and NFT sectors, has struggled to keep pace with Bitcoin in the broader crypto market.

Bitwise CIO Matt Hougan recently commented on Ethereum’s struggles, noting that the chain is currently viewed as a “contrarian bet” by many in the space. While some investors are shying away from Ethereum due to its ongoing challenges, Hougan suggested that this skepticism could create opportunities for long-term contrarian investors who believe in the network’s ability to overcome short-term hurdles.

The challenges facing Ethereum are not limited to transaction fees and user activity. The platform’s stakers, who help secure the network through Ethereum’s PoS mechanism, have also seen their daily revenue drop to a six-month low. This decrease in staking rewards further compounds the difficulties for Ethereum, as it may discourage participants from locking up their assets to support the network.

Lower staking rewards could also impact Ethereum’s long-term security model, which relies on a large, distributed group of validators. If staking becomes less attractive, the network could face issues maintaining decentralization and security.