The sentiment around Ethereum right now is almost all bad. Some talk about how SOL is crushing them in memecoins and retail use. Some talk about Vitalik selling some because, or maybe not because, he has a new girlfriend.
But one thing that is going on that no one can refute is about the Ethereum Foundation. The EF is selling. And they have been. It’s been EVERYWHERE over the last couple of weeks including at Token 2049 in Singapore. The ETH-BTC trading pair is down. Evidence of the Foundation’s selling is everywhere.
So today, a question. Does the Ethereum Foundation’s selling of some of its ETH matter? If so, how much? Short-term or long-term? We go over all the potential implications today. So Stay tuned to see if the EF is telling you what you should be doing with your ETH or not.
The ETH Foundation Budget
The Ethereum Foundation’s annual budget is ~$100 million per year. This includes paying salaries, marketing, and extensive grant programs. And that money has to come from somewhere. The 2022 Annual Report was the most recent publicly available online.
According to it, they had at that time $1.6 billion in the Foundation Treasury. And of that, 80% or $1.2 billion is in ETH. Naturally, the Foundation has to sell some from time to time to help fund these operations.
Grants that secured funding last quarter are in the spotlight 🎯 Check out our Allocation Update: Q2 2024 blog post for the full rundown! https://t.co/ipKbstK4mE
— EF Ecosystem Support Program (@EF_ESP) August 30, 2024
One of the biggest and best uses of funds the EF does is its grants program. In Q2-2024, the Foundation gave $8.4 million away to over 75 different projects in all areas of the Ethereum Ecosystem. This includes regional ETH hubs and communities, and educational projects to improve technologies like privacy on ETH.
The EF also supports bug bounties, tech improvements, and funding and implementation of different EIPs like this one on EIP-4844. 4844 is the proto-dank sharding improvement allowing for the creation of blobs and better scalability.
✅ [New bug bounty] Earn up to $250,000 with @erc4337 team from the @ethereum foundation
💸 You will be rewarded based on these tiers:
Critical: $100,000 – $250,000
High: $25,000 – $50,000
Medium: $5,000 – $10,000
Low: $1000 – $2000Start the #bugbounty hunt right now!… pic.twitter.com/oUOmMAeQsk
— HackenProof (@HackenProof) September 17, 2024
Foundation Selling Not New
Whether you are an ETH fan or not, it may not surprise you to learn this fact. The ETH Foundation has been selling all along. Here is some evidence of EF sales from 2020 and 2021.
The Ethereum Foundation used to own 11.9M ETH (which at today’s prices would be worth $55bn).
Now they own 97% less ETH because they sold most of it at prices below $10.
The idea that it’s a top signal when they sell is highly idi0tic. pic.twitter.com/DY3DhAmBt5
— David Iach (@davidiach) November 12, 2021
And now it appears they are selling every week to fund operations. As you might expect, there are concerns. And not just from ETH holders. Like XRP with its regular programmed quarterly sales, the EF is getting some of the kind of attention they don’t want.
From the SEC, they are giving ETH a hard look even though it’s been classified as a commodity. Regular sales like this don’t help the argument that it’s not a security. These sales help the SEC make its argument that the “common enterprise” or “reliance on others” part of the Howey Test could invalidate ETH’s current status. And that would create many, many problems for ETH in the US if that were to happen.
There are many just like this commenter on X who see the EF as an obstacle for Ethereum. That the foundation is keeping ETH from reaching the greatness that it could. So what do you think? Is the Ethereum Foundation a net positive or negative for Ethereum? Let us know in the comments below.
Is All This Bullish or Bearish for ETH?
So is this bullish for Ethereum or bearish? Is this typical behavior from the EF or is it troubling? In our opinion, it’s both bullish and bearish.
- The Bull Case
The bullish case is pretty easy to understand. While the ETH Foundation is selling, it still has huge holdings in ETH and is committed to ETH’s success. Its price over the last month of all this activity is down 5.5%. Not great but hardly earth-shattering.
ETH is still the first mover when it comes to building dApps. Especially so for DeFi and NFTs. ETH still benefits from fees for all the Layer 2’s that use it for its security and finality of transactions. Some of the uses for the ETH Foundation sales include a solid grant program to keep ETH and EVM growing. If you believe in the ETH Foundation and Consensys and how they are managing ETH, then you are probably OK with what’s going on.
- The Bear Case
The bear case seems easy to understand, too. A little more so these days since people do seem to be down on ETH right now. The Foundation sales are not just a one-time thing, or even occasionally. They are pretty regular. Not as regular as XRP’s quarterly sales but the Foundation has been doing this for years.
And if anything, they are doing it with less transparency than XRP does. We only know they are selling when on-chain researchers show the activity from wallets marked to the ETH Foundation. At least XRP is telling you what they are going to do and when. Between The Foundation, Consensys, and control of validators by liquid staking protocols like Lido and Coinbase Staking, there are lots of ways to argue Ethereum is becoming more centralized.
And you may agree or you may not. Decentralization might be important to you…..or it might not. So what do you think? Is the ETH Foundation selling bullish, bearish, or neither for Ethereum? Let us know in the comments below.
Disclaimer
The information discussed by Altcoin Buzz is not financial advice. This is for educational, entertainment, and informational purposes only. Any information or strategies are thoughts and opinions relevant to the accepted risk tolerance levels of the writer/reviewers and their risk tolerance may be different than yours. We are not responsible for any losses you may incur due to any investments directly or indirectly related to the information provided. Bitcoin and other cryptocurrencies are high-risk investments so please do your due diligence. Copyright Altcoin Buzz Pte Ltd.
