• Ethereum has seen a rapid decline in supply on exchanges, now at the lowest level in 5 years
• This could be attributed to ETH staking starting late 2020
• Bitcoin also has only 11.8% of its supply on exchanges, the lowest since the bull market top five years ago
ETH Supply On Exchanges Hits 5-Year Low
Ethereum (ETH) is seeing a rapid decline in its supply on exchanges, now at the lowest levels it’s been in five years. This trend can be attributed to ETH staking that began late 2020 and Bitcoin also having only 11.8% of its supply on exchanges, the lowest since the bull market top five years ago. As liquidity is thin and volatility rises, aggressive moves to the downside are possible despite a bullish first quarter for the crypto market as a whole.
What Caused The Drop?
The drop in supply of ETH on exchanges is likely due to staking that opened up November 2020 with users locking up their ETH in anticipation of Ethereum’s transition to proof-of-stake network last September. Stakers finally got access to their tokens last week when Shanghai upgrade went live. A graph plotting amount of ETH locked up in staking contract compared to ETH on exchanges shows this correlation clearly.
Stablecoins And Bitcoin Also Fleeing Exchanges
Not only is Ethereum showing this pattern but stablecoins and Bitcoin have also fled from exchanges in recent months. 45% of stablecoin balance has exited from exchange over four months with total balance reaching its lowest point since October 2021. Similarly, Bitcoin now has 11.8% of its supply on exchanges which is also its lowest number since bull market top five years ago.
Implications Of Low Exchange Supply
Low exchange supplies mean liquidity being thin and volatility rising with aggressive moves to downside possible despite overall bullishness for crypto markets recently during first quarter of 2021 .
Conclusion
Ethereum’s dive below $1,000 after getting close to $5,0000 late 2021 was abrupt but it appears that capital could still be fleeing crypto markets even more than previously expected as evidenced by low percentages of both Etheruem’s and Bitcoin’s supplies being held on echange as well as large percentage decrease in stablecoin balances over short timespan all pointing towards investors taking profits off table or looking for safer havens elsewhere.