Dive into the changing Ethereum supply landscape

ethereum supply distribution says a lot about market sentiment, potential price movements, and the health of the ecosystem. Knowing which addresses, whether whales (massive holders), sharks (massive holders), or shrimp (small holders), own how much eth can provide invaluable information on market trends and possible future moves.

For context, let’s consider bitcoin (btc). Historically, the behavior of bitcoin whales and other large holders has been considered an important predictor of market direction. If they start to unload their holdings, it often indicates a bearish phase. On the contrary, when they accumulate, the market can expect bullish movements.

ethereum, on the other hand, has a more complex ecosystem. While bitcoin is primarily a store of value, ethereum‘s usefulness as a platform for decentralized applications means its holders may have different motives. Therefore, while both cryptocurrencies may experience similar trends in their holdings, the reasons and results may vary significantly.

There has been a significant drop in eth held by whales and other large holders since the beginning of the year.

Data from Glassnode reveals that addresses with a balance of more than 100,000 eth saw their holdings drop from 28.9 million eth in October 2022 to just 20.7 million eth a year later. This is a sharp decline from 4.7 million eth in 2023. Similarly, addresses holding between 10,000 and 100,000 eth lost 3.5 million eth, and those with balances between 1,000 and 10,000 eth reduced their holdings by 13 .8 million eth to 12.9 million. Meanwhile, addresses with balances of 100 to 1,000 eth and 10 to 100 eth have seen drops of around 800,000 eth and 200,000 eth respectively this year.

Chart showing the decline in ethereum supply held by addresses with balances from 1,000 eth to over 100,000 eth in 2023 (Source: glass node)

Looking at the smaller fish in the ethereum sea shows a different market dynamic. Holders with balances between 1 and 100 eth have remained relatively stable throughout the year, with only marginal increases. However, the smallest holders, those with less than 0.01 eth, experienced a notable rally, accumulating an additional 21,860 eth since January.

Chart showing the supply of ethereum held by addresses with balances ranging from 0.01 eth to 100 eth from 2016 to 2023 (Source: glass node)

Despite the declines among the largest holders, the supply distribution still shows that the majority supply of ethereum is held by substantial addresses. As of October 10, 29.5% of ethereum supply is held by addresses with balances of 10,000 to 100,000 eth. In comparison, a quarter (25.2%) of its supply is in the wallets of whales, those with more than 100,000 eth.

Chart showing ethereum supply distribution in 2023 (Source: eth&category=Supply&m=addresses.SupplyDistributionRelative&s=1672527600&u=1697031862&zoom=ytd”>glass node)

But what does this change indicate? A simple assumption could be that the whales are selling off. However, delving deeper into on-chain metrics offers another perspective. The percentage of ethereum supply locked in smart contracts has increased this year, from 25.6% to 31.9%.

Chart showing the percentage of ethereum supply in smart contracts in 2023 (Source: eth&category=Supply&m=distribution.SupplyContracts&s=1672527600&u=1697029613&zoom=ytd”>glass node)

This increase suggests that while large holders might be decreasing their liquid eth holdings, they are not necessarily abandoning the ethereum ecosystem. Instead, they could be locking up their assets in DeFi projects, staking, or other smart contract-powered initiatives.

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