On-chain data shows that investors withdrew a large amount of Ethereum during 2022, as ETH reserves fell more than 30%.
Ethereum Exchange Reserves Dropped Drastically This Year
As noted by an analyst in a CryptoQuant to post, these investors may have been pulling out with the goal of holding for the long term. The “exchange reserve” is an indicator that measures the total amount of Ethereum that is currently stored in the wallets of all centralized exchanges.
When the value of this metric increases, it means that holders are depositing their coins on exchanges at the moment. One of the main reasons investors use exchanges is to change their ETH to another crypto or to cash out in fiat. Therefore, the exchange reserve can act as the offer to sell the asset, so any increase in it can have bearish effects on the price.
On the other hand, a decrease in the value of the indicator implies that investors are transferring their coins at the moment, which suggests that the offer to sell is decreasing. Long exchange withdrawals may be a sign that headlines are currently piling up, which means they are bullish on crypto.
Now, here’s a chart showing the trend in Ethereum’s exchange reserve over the past few years:
Looks like the value of the metric has been going down in recent months | Source: CryptoQuant
As the chart above shows, the Ethereum exchange reserve has already experienced some decline during 2021, but the downward trend has been even more pronounced in 2022. The indicator used here is the “all exchanges” version, which means which covers data related to both the spot and the derivative. exchanges
An interesting trend to note is that the decline in the value of the metric has been especially rapid since the FTX crash. This is because the crash of an exchange known as FTX caused investors to veer away from centralized platforms more than ever before, prompting them to withdraw their cryptocurrency en masse from exchanges so they could store it in personal wallets, the keys they hold. .
In total, the Ethereum exchange reserve has shrunk by more than 30% over the course of 2022. “One of the best things about the year has been the prospect of having deflationary ETH,” says the quant. “Investors seem to think so too and have withdrawn large amounts of CEX with the most likely purpose of holding them for the long term.”
ETH price
At the time of writing, the price of Ethereum is hovering around $1,200, up 1% in the past week.
ETH has been moving sideways in the last few days | Source: ETHUSD on TradingView
Featured Image by DrawKit Illustrations on Unsplash.com, Charts by TradingView.com, CryptoQuant.com
