Ethereum Foundation: Funds Management or "Top-Taking" Behavior?

Recently, the cryptocurrency market has experienced a wave of upward momentum; however, an on-chain operation has caught the market's attention. In the early hours of August 24, the Ethereum Foundation transferred 35,000 ETH to a certain trading platform. This operation inevitably reminds people of May 6 of last year, when the Foundation transferred 15,000 ETH to the same platform, and then within six days, the price of ETH fell from $2,006 to $1,740, a drop of 13%.

There are voices in the market dubbing the Ethereum Foundation as "the master of escaping peaks." This statement originates from the foundation's past record of selling a large amount of ETH at market highs multiple times. For example, on May 17, 2021, the foundation sold 35,053 ETH at an average price of $3,533, after which the market experienced the "5.19 crash," with the coin price nearly halving to around $1,800. On November 11 of the same year, the foundation sold 20,000 ETH at an average price of $4,677, after which the market began to decline continuously.

However, from a longer-term perspective, the foundation is not always able to accurately grasp market peaks. Data shows that the foundation sold 100,000 ETH at a price of $657 on December 17, 2020, and 28,000 ETH at a price of $1,790 on March 12, 2021, both of which missed the subsequent significant price increase opportunities.

In fact, by observing the transfer records of the foundation over the past year, it can be found that its operations are closer to regular sales rather than precise "top escaping".

Regarding the recent transfer of 35,000 ETH, the executive director of the foundation explained that this is part of the fund management activities. The foundation budgets approximately $100 million each year, primarily for grants and salary expenditures, with some beneficiaries only accepting fiat currency. Due to the complex regulatory environment, the foundation has been advised to conduct its funding activities cautiously. It is worth noting that this ETH transfer does not equate to an immediate sale and may be gradually carried out in a planned manner.

According to the analysis, after this transfer, the foundation still holds approximately 273,000 Ether, accounting for 0.25% of the total supply. The foundation's grants for the fourth and third quarters of 2023 were $30 million and $8.9 million, respectively, mainly for global conferences, online courses, and innovative projects.

According to the report from 2021, the foundation's total expenditure on internal expenses, external grants, and rewards was $48 million. Among them, L1 R&D expenditures were $21 million, community development (including grants and education) expenditures were $9.7 million, and internal operations (such as salaries and legal fees) expenditures were $5.1 million.

It is worth mentioning that the foundation's sale of tokens is not an isolated case; other projects, such as Polkadot, have also sparked controversy due to large expenditures.

From a market impact perspective, since the listing of the Ethereum ETF on July 23, as of August 26, a certain fund's ETH product has seen a cumulative net outflow of 799,000 ETH, with an average daily net outflow of 32,000 ETH. In contrast, the 35,000 ETH transferred by the foundation this time is not particularly significant.

The foundation's act of selling ETH can be understood, as the team needs financial support for development and operations. Considering that the ETH held by the foundation accounts for only 0.25% of the total supply, its sale has a relatively small direct impact on market liquidity. However, this behavior may negatively affect market sentiment, such as leading to a decline in holder confidence or triggering a sell-off by followers.

To alleviate market concerns, the foundation could consider disclosing financial information more frequently and in more detail. For example, regularly publishing comprehensive reports that include team expenditures, ETH sale plans, fund usage, team size, and so on. At the same time, providing the community with channels for information regarding the foundation's announcements, activities, and financial operations. This approach not only stabilizes community sentiment but also enhances ETH holders' understanding and support of the foundation.

In the future, we look forward to the Ethereum Foundation attracting more developers and users to this most well-known smart contract blockchain through continuous research and development, public relations, community operations, and market education, thereby promoting the further development of the Ethereum ecosystem.