When the amount of crypto assets on exchanges begins to drop, there is usually a correlation with the price. In Ethereum’s case, the amount of Ether on exchanges is dropping off a cliff, yet the price isn’t budging. This makes one wonder what is going on exactly, and what may come next.
Dwindling Ether on Exchanges
In a way, it is good to see fewer crypto assets reside in exchange wallets. This is especially true if the exchange in question is a centralized platform, which takes control of one’s coins.
According to Glassnode statistics, the Ethereum balances on exchanges are decreasing rapidly. A three-month low has been recorded in recent hours. Currently, there is just over 17.66 million ETH on centralized trading platforms as of right now. Considering how Etherum currently has a supply of over 111.587 million, that means under 16% of all Ether is on exchanges right now.
The chart indicates that nearly 1 million ETH has been pulled from exchanges since late June. If this trend continues, the supply on trading platforms will drop below $17.5 million very quickly. This makes one wonder where all of the Ether is going to, a question that isn’t easy to answer.
Shifting the Flow of Ether
Glassnode provides a lot of interesting statistics that users may want to take note of. The ongoing decline in Ether balances on exchanges coincides with a strong rise in active ETH addresses. An active address means that someone either sent or received money through that particular address in the past seven days.
Whether that automatically means that users are withdrawing Ether to their own wallet, is difficult to determine. These addresses include smart contracts as well, thus there can be a number of reasons for this sudden increase.
One contributing factor is the ongoing rise in DeFi popularity. Over $1.7 billion is currently locked in all DeFi protocols combined. Compound remains the most popular offering, primarily due to its yield farming appeal.
How much of the ETH being withdrawn from exchanges ends up in decentralized finance offerings is impossible to tell. It will certainly be an influence of sorts.
All in all, these changes do not seem to make much of an impact of the value of Ethereum as of yet. Following a recent price drop of $3, the market is still trying to recover a bit.
Making Ether more scarce on exchanges may help nudge this trend back in an upward direction.
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