Recent data has revealed a significant drop in the supply of Bitcoin (BTC) and Ethereum (ETH) on exchanges. BTC ECHO analyst Leon Waidmann shared Glassnode data indicating that exchange balances for both cryptocurrencies are at their lowest levels in years. Bitcoin’s supply on exchanges has dwindled to 11.6%, while Ethereum’s supply has decreased to 10.6%. This trend suggests that large crypto holders, known as whales, have been accumulating these assets and transferring them to self-custody.
Waidmann emphasized the importance of this development, highlighting the imminent possibility of a supply squeeze. This impending squeeze could potentially drive up the prices of Bitcoin and Ethereum as more investors are seen accumulating rather than selling. In anticipation of this, Waidmann urged his audience to prepare for what could potentially be a significant movement in the market.
Crypto analyst Ali Martinez proposed that the recent surge in accumulation could be attributed to the approval of Spot Ethereum ETFs. Martinez noted that approximately 777,000 ETH (equivalent to $3 billion) have been withdrawn from crypto exchanges following the approval of these funds by the Securities and Exchange Commission (SEC). It is anticipated that the launch of these Spot Ethereum ETFs will catalyze a bullish trend in the market, prompting large holders to position themselves strategically prior to this event. Bloomberg analyst Eric Balchunas forecasted that these ETFs could commence trading as early as July.
Despite the optimism surrounding the launch of Spot Ethereum ETFs, research firm Kaiko issued a cautionary note. It warned that while these funds could potentially boost Ethereum’s price, there may also be significant selling pressure due to outflows resulting from Grayscale’s Spot Ethereum ETF. Drawing parallels to the experience of Grayscale’s Spot Bitcoin ETF, which saw substantial outflows leading to a decline in Bitcoin’s price, Kaiko suggested that a similar scenario could unfold for Ethereum.
Crypto analyst Michael Nadeau offered insight into the differences between Ethereum and Bitcoin in terms of potential price movements. Nadeau suggested that Ethereum could reach new all-time highs more swiftly than Bitcoin did following the launch of Spot Bitcoin ETFs. He pointed out that Ethereum does not face the same pressure from “structure selling” as Bitcoin, as ETH validators do not need to sell their holdings to cover operational costs, unlike Bitcoin miners. Nadeau also highlighted the fact that a significant portion of Ethereum’s supply is locked on-chain, emphasizing that Ethereum is more responsive to market dynamics compared to Bitcoin.
The decreasing supply of Bitcoin and Ethereum on exchanges, coupled with the impending launch of Spot Ethereum ETFs, indicate a potential for significant price movements in the near future. While challenges such as selling pressure are anticipated, the unique characteristics of Ethereum suggest that it may navigate these obstacles differently than Bitcoin. Investors and market participants should closely monitor these developments to capitalize on potential opportunities in the crypto market.