Ethereum Supply on Exchanges Hits 5-Year Low Amid Capital Flee
• Ethereum’s supply on exchanges is at its lowest in 5 years, with only 15% of ETH currently on exchanges.
• The drop has been swift since staking opened up in late 2020, with Bitcoin and stablecoins also fleeing exchanges.
• Volatility has risen as a result, with aggressive moves to the downside possible despite the bullish first quarter for crypto markets.
ETH Supply on Exchanges Reaches 5-Year Low
The amount of Ethereum tokens on exchanges is now at its lowest point in five years, with only 15% of the total supply currently available for trading. This sharp decline can be attributed to the launch of staking contracts in late 2020, leading to investors taking their funds off exchanges and locking them away until recently. Additionally, Bitcoin and stablecoins have seen similar trends, meaning liquidity across all cryptocurrencies remains thin.
Staking Plays A Major Role
The ETH staking contract was opened up in November 2020 ahead of Ethereum’s transition to a proof-of-stake network. Investors were able to lock up their funds in anticipation of the Merge going live last September, though they could only access their tokens again after last week’s Shanghai upgrade went live. Comparing the amount of ETH locked up in staking contracts and the amount left on exchanges highlights how much this new feature has impacted capital flight from crypto markets overall.
Increased Volatility & Downside Risk
As liquidity continues to dwindle across all major cryptocurrencies due to capital fleeing from exchanges, volatility has increased significantly during 2021 so far – even despite strong gains made by most coins over Q1 2021/22. This means that while further upside potential remains plausible for crypto markets as a whole, aggressive moves to the downside are also possible should sentiment take a turn for the worse or if any negative news occurs suddenly.
What Does This Mean For Ethereum?
Ethereum appears set to remain one of crypto’s strongest performers moving forward due to its high utility and low supply relative to Bitcoin or other altcoins – but it will remain sensitive to changes in market sentiment and news flow more than ever before due its increasingly low levels of liquidity on exchanges compared to previous years. Investors considering entering into positions should bear this fact in mind when making decisions about where and when they buy or sell tokens – particularly given how swiftly price can move under current conditions.
Ethereum has seen rapid declines in exchange balances over recent months as capital flees towards staking contracts instead – leading not just reduced liquidity but increased volatility too as market participants react more quickly (and more drastically) than before when faced with changing news or sentiment flows throughout 2021/22 so farI