ETH Supply on Exchanges Falls to 10-Year Low. What Does this Mean?

According to Santiment data, Ethereum’s supply on crypto exchanges has dropped by 16.4% since January. This is the lowest it’s been since November 2015, a 10-year low. This big drop shows that people may be holding onto their ETH for the long run, possibly moving it to secure wallets.

A big drop in the amount of ETH on crypto exchanges could mean the price might go up soon, which is often called a “supply shock.” However, this will only happen if demand stays strong or rises faster than the supply decreases.

Notably, despite little ETH existing on exchanges, the price is having trouble staying above $2,000. It is now around $1,969. This is a 26% drop in the last month and a 1.75% drop in the previous 24 hours, which is worrying for its short-term future.

What Does This Mean for ETH?

Bitcoin (BTC) witnessed a similar scenario in January when exchange reserves plummeted to a nearly seven-year low. Shortly thereafter, Bitcoin experienced a significant price rally. This historical parallel has fueled optimism among some crypto traders and analysts, who anticipate a similar trajectory for Ether.

Crypto trader Crypto General expressed this sentiment on X, stating it is “just a question of time before the big supply shock.” Crypto commentator Ted echoed this view, suggesting that decreasing ETH supply on exchanges will soon lead to “bidding wars” among buyers.

While a decline in exchange supply typically indicates long-term accumulation, ETH has failed to capitalize on what would usually be considered favorable market conditions. ETH has underperformed relative to other major cryptocurrencies, declining almost 47% from its December peak to its current level.

Ethereum ETF Hits 11-Day Outflow Rows

Moreover, data from Farside Investors shows that ETH exchange-traded funds (ETFs) have seen withdrawals for 11 days in a row amidst a broader market decline. Investors withdrew $73.6 million from ETH ETFs on March 13, opting for less unpredictable options like cash, government bonds, and stablecoins pegged to the dollar, creating the largest single-day outflow.

As of March 20, total ETH ETF holdings are about $7 billion, with cumulative inflows of $2.5 billion since launch. But, the recent outflow pattern of about $358 million over the previous 11 days suggests that institutions are becoming less interested in the asset. Adding to the uncertainty, Ethereum’s performance against Bitcoin has reached a five-year low.