Ethereum (ETH) Supply Hits 10-Year Low as Investors Withdraw from Exchanges

Ethereum (ETH), the second-largest cryptocurrency by market capitalization, has recently experienced a significant decline in its supply on exchanges, reaching its lowest point in nearly a decade.

Ethereum (ETH), the second-largest cryptocurrency by market capitalization, has experienced a striking reduction in its supply on exchanges, to its lowest point in nearly a decade. This trend, highlighted by on-chain data from analytics firm Santiment, indicates that investors are diligently withdrawing their ETH from centralized exchanges.

This large-scale movement is often a telltale sign of strong accumulation, which could have bullish implications for the cryptocurrency’s price.

Ethereum’s Supply on Exchanges Hits 10-Year Low

The metric “Supply on Exchanges” measures the total amount of Ethereum held in exchange wallets. A higher reading usually indicates increased selling pressure, as investors transfer their assets to exchanges for trading or liquidation. Conversely, a lower reading suggests ETH is being withdrawn, frequently to private wallets for long-term investment or staking, decreasing the immediate selling pressure within the market.

As per Santiment’s latest insights, Ethereum’s supply on exchanges has reached its lowest level in nearly ten years. This milestone is significant as it signals a potential shift in investor behavior, favoring long-term investment over short-term trading.

Key Factors Driving ETH Withdrawals

Several factors could be contributing to this decline in Ethereum’s supply on exchanges:

Potential Price Implications: Is Ethereum Primed for a Rally?

Historically, a decrease in an asset’s supply on exchanges tends to align with upward price movements, as the selling pressure lessens while demand stays constant or increases. If the trend of ETH leaving exchanges continues, the scarcity could create conditions for a supply crunch, potentially pushing prices upward.

Several analysts are predicting that Ethereum could be preparing for a substantial rally due to these on-chain dynamics.

Here’s why analysts believe Ethereum could be poised for a rally:

Challenges and Potential Risks

Despite the bullish indicators, several challenges could still impact Ethereum’s price trajectory:

Sharp decline in Ethereum's supply on exchanges hits 10-year low. Is this a bullish sign for ETH price? | CryptoSlatefrom 1970 to 1973, the "Supply of ETH on Exchanges" has never fallen below 2.00M. But recently, it dropped below that level to reach its lowest point since at least 2014.

According to crypto analytics firm Santiment, the metric tracks the total amount of Ethereum that is being held by exchange wallets. A higher reading usually means there is more selling pressure, as investors are transferring their coins to exchanges to sell them. A lower reading suggests that ETH is being withdrawn from exchanges, often by investors who are planning to hold their coins for the long term or to stake them.

The chart shows that Ethereum's supply on exchanges has been steadily decreasing since the beginning of 2023. This trend is significant because it signals a potential shift in investor behavior.

In early 2023, investors were largely focused on short-term trading, which led to rapid changes in Ethereum's price. However, as the crypto winter progressed, investors may have become more interested in accumulating large amounts of ETH for the long term.

ETH price movement in 2023. Credit: TradingView

Earlier this year, we discussed how the shift in on-chain metrics like "price-to-holder's bottom topology" and "new addresses, 30d avg" signaled that a large-scale accumulation was unfolding.

This aligns with the observation that a lower "Supply of ETH on Exchanges" usually coincides with higher price movements, as the selling pressure lessens and demand remains constant or increases.

If the trend of ETH leaving exchanges continues, then the lower liquidity could create conditions for a supply crunch, potentially driving prices higher. Several analysts are also predicting that a large Ethereum rally could be on the cards.

Here are some of the reasons why analysts believe Ethereum could be poised for a rally:

However, there are also some challenges that could impact Ethereum's price recovery. The crypto winter is still ongoing, and there is a possibility of further price declines. Additionally, the competitive landscape in the DeFi sector is heating up, which could put pressure on Ethereum's dominance in the decentralized finance market.

Finally, it's important to note that on-chain data can be a lagging indicator of price movements. While a lower supply of ETH on exchanges could eventually lead to an increase in price, there is no guarantee that this will happen immediately. Ultimately, Ethereum's price will be driven by the broader market trends and the interplay of supply and demand.