Ethereum: Will MEV bots hinder network growth?

• Ethereum’s recent positive momentum was accompanied by challenges posed by MEV bots and staking reward fluctuation.
• Growing retail interest in Ethereum fueled adoption.

Recent positive developments in the cryptocurrency market have revitalized sentiments, particularly benefiting major players like Ethereum [ETH]. However, along with the newfound enthusiasm, certain challenges are surfacing, most notably the rise of MEV bots.

Is your portfolio green? Check out the ETH Profit Calculator

MEV bots on the rise

Ethereum’s validators have been witnessing a surge in Miner Extractable Value (MEV) earnings, averaging 772 ETH daily and totaling 187,000 ETH this year.

MEV bots, which exploit price discrepancies between blockchain transactions, can influence the network’s stability and potentially disrupt transactions.

The Ethereum network is experiencing a high concentration of MEV bots, raising concerns about network congestion and fairness in transaction prioritization.

Ethereum validators have earned an average of 772 ETH per day in MEV, amounting to 187k ETH in total so far this year.

To learn more about MEV post-Merge on Ethereum, read this Galaxy Research report: https://t.co/SenVr6B7XJ pic.twitter.com/6WonCNwxsp

— Galaxy Research (@glxyresearch) August 29, 2023

Despite these challenges, Ethereum’s staking ecosystem is growing as more users participate. However, the rewards for Ethereum stakers have witnessed a decline in the past month.

This decline in rewards could impact the attractiveness of staking, affecting the network’s decentralization and security.

Source: Staking Rewards

Furthermore, gas usage on the Ethereum network remains consistent, providing stability for transactions and dApps and enhancing user experience.

Moreover, NFT trades on the network rose, indicating a thriving digital collectibles market and the network’s versatility.

Source: Santiment

The Ethereum network also witnessed a surge in retail interest, with the number of addresses holding over 0.01 coins reaching an all-time high of 24,832,506. This growing retail interest could lead to increased adoption and mainstream recognition for Ethereum.

However, Implied Volatility has shown a decline, potentially indicating a more stable market environment, which can influence trader behavior positively.

Realistic or not, here’s ETH’s market cap in BTC’s terms

On the pricing front, Ethereum’s performance was notable. Its MVRV ratio, a metric indicating the overall profit or loss of holders, was showing signs of decline. This suggested an increasing number of profitable addresses.

However, there was a concerning trend in the long-short difference, where long-term addresses are decreasing. This can signify potential selling pressure, as short-term holders tend to be more inclined to liquidate their assets.

Source: Santiment