Ethereum (ETH), the second-largest cryptocurrency, has seen its supply hit a record low on Centralized Exchanges (CEXs) worldwide. While analysts usually treat this as a midterm bullish signal for Ethereum price, questions have been raised about the safety of investors’ funds.
Leon Waidmann, Head of Research at Onchain Foundation, has expressed excitement over Ethereum’s future by highlighting recent data from Glassnode.
“We are not bullish enough. As this development continues, ETH supply shock potential is real,”
Waidmann stated.
Ethereum Set for Supply Shock
The data from Glassnode shows that only 9.75% of ETH was available on centralized exchanges as of late August. This means less than 1 in 10 coins is deposited on CEXs globally. This is a historic record for Ethereum, as it is the first time it has hit this low since its public release.
From observation, the Ethereum community has long stopped sending Ethereum to CEXs. This trend was last recorded in March to lock in earnings after the coin’s price reached a new yearly high. The interest in removing ETH from CEXes reflects sellers’ lack of enthusiasm to sell their holdings. An increasing number of ETH holders might be holding on to their coins, hoping to sell them later at higher prices. They anticipate ETH prices to rise as demand increases.
When asked when the supply shock will kick in, Waiddman says as soon as demand for ETH picks up meaningfully. However, he pointed out that demand for the coin has yet to reach such a level.
Another major trend accompanying Ethereum’s reduced share on centralized exchanges is the reduction of gas prices. Gas fees target all-time lows in August 2024, making Ethereum (ETH) use more affordable than ever. In March 2024, Layer 2 platforms paid over 10,000 ETH in fees on Ethereum, but in July, they paid less than 400 ETH, dropping by approximately 96%.
Are ETF Investors Responsible for Ethereum Stacking?
The crypto market analysts are now wondering whether traders in the Exchange-Traded Fund (ETF) are responsible for stacking Ethereum. On July 23, the US Securities and Exchange Commission (SEC) approved multiple Ethereum ETF products for trading.
This allowed investors to gain exposure to the digital asset without holding it. On the first day of trading, the spot Ethereum ETF products saw over $1 billion in total volume.
Before the launch, top stakeholders and crypto whales began accumulating ETH. For example, Tron founder Justin Sun acquired 1,614 ETH for $5 million USDT before the ETF approval. This huge investment, along with others, could have contributed to the reduction in Ethereum across CEXs.
Impact on Ethereum price
At press time, ETH price was finding a balance in the $2,700 price range. Within the past 24 hours, the coin’s price dropped by 2.44% to trade at $2,701. However, the trading volume surged 25.5% to $12.2 billion, suggesting increased investor sentiments.
Many market watchers claim that less value in the short term might lead to more value in the long term. This presents a bullish case for adopting ETH in the future with a potential positive impact on price.
