Recent data from Glassnode shows that the amount of Ether held on centralized crypto exchanges has hit a five-year low, with only 17.8 million ETH currently on these platforms. This represents less than 15% of the total token supply of the Ethereum network. To compare, during the bull market in 2021, the exchange balance was around 26%. This drop in Ether balance on exchanges is considered a bullish trend, as it indicates that the supply of the crypto-asset available for purchase is limited.
Decrease in ETH Balances on Exchanges
The decline in ETH balances on exchanges began in September 2022, but it became more pronounced after FTX went bankrupt two months later. This event shook investor confidence in centralized custodians. However, this month’s decrease in ETH balances on exchanges coincides with a rise in staking. As a result, staked ETH has increased from 19.3 million before the Shapella upgrade to more than 21.3 million since the beginning of May.
Shapella Upgrade and Increase in Staking
The Shapella upgrade on April 12 allowed validators to withdraw their staked Ether from the Beacon Chain after three years. More and more validators have re-staked their ETH, which has contributed to the decline in the supply of the token. This decrease in supply is considered bullish for the price of ETH. CryptoPotato previously reported that the amount of Ether being staked exceeded the amount being withdrawn within a week after the Shapella upgrade. The influx in staking appears to be driven by institutional staking service providers and investors reinvesting rewards after withdrawal.
Implications of the Decrease in Ether on Exchanges
The decreasing balance of Ether on exchanges could have implications for the crypto market. As the supply of ETH available for purchase decreases, it could lead to an increase in demand, which could drive up the price of the crypto-asset. Additionally, the decreasing balance of ETH on exchanges suggests that investors are becoming more interested in holding their ETH long-term through staking, rather than trading it on exchanges.
The decreasing balance of Ether on centralized crypto exchanges is a bullish trend for the price of ETH. The rise in staking, driven by institutional service providers and investors reinvesting rewards, has contributed to the decline in the supply of the token. As the supply available for purchase decreases and demand potentially increases, it could lead to a rise in the price of ETH.