Ethereum Reserves on Exchanges Hit Five-Year Low, Signaling Potential Price Surge

Ethereum Reserves on Exchanges Hit Five-Year Low, Signaling Potential Price Surge

According to data from Glassnode, the reserves of Ethereum (ETH) held by cryptocurrency exchanges have hit a five-year low. The current amount of ETH on exchanges, which stands at 17.8 million, is the lowest it has been since July 2016.

Starting from September 2022, the number of Ethereum tokens available on trading platforms has been on a decline. The situation was further aggravated by events such as FTX’s insolvency two months later, which eroded investor trust in centralized custodians.

The current reserve of ETH on exchanges represents less than 15% of the total amount of Ether on the Ethereum network. During the bullish market of 2021, the exchange balance reportedly accounted for 26% of the total ETH supply. This reduction in exchange reserves is considered a bullish signal, indicating high demand and low supply. Additionally, there is a limited availability of ETH on centralized exchanges for immediate trading.

Interestingly, while ETH balances on exchanges have been decreasing, staking has been on the rise. Since the beginning of May, the total number of staked ETH has increased from 19.3 million (prior to the Shapella update) to over 21.3 million.

With the implementation of an update on April 12, validators are now permitted to withdraw their staked Ether from the Beacon Chain after a three-year period. The increasing number of validators who have re-staked their ETH has led to a decrease in the token’s supply, which is seen as a positive factor for its price.

Recent data revealed that, in the week following the Shapella update, the volume of Ether being staked surpassed the volume being withdrawn. This migration is primarily driven by institutional staking service providers and investors reinvesting their gains after withdrawal.

Overall, these developments suggest a potential price surge for Ether, as the decreasing reserves on exchanges and the increasing staking activity contribute to a tightening supply and growing demand.