Ethereum (ETH) balances on crypto exchanges have plunged to a five-year low, triggering speculation about its future price action.
Intriguing developments have always marked the ebb and flow of the crypto market, and this week is no exception.
The star of the show is ether, the world’s second-largest cryptocurrency, quietly making headlines due to an intriguing phenomenon: its balance on exchanges is nearing an all-time low.
The question on everyone’s mind is: what could this mean for the future of ETH?
Glassnode’s data paints a compelling picture. As of May 26, of the total ETH supply of 120.26 million, only 16.64 million are present on centralized exchanges, suggesting that 86% of the ETH supply is idle.
This marks a drastic decline from the 2021 bull market, during which the exchange balance was around 25-26%. This trend seems to suggest bullish sentiment as limited supply drives prices higher.
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One of the significant contributors to this phenomenon is the growing popularity of ether staking. Millions of additional coins have been staked thanks to the recent upgrade from Shapella to the Ethereum network.
This move has resulted in the absorption of a significant part of the ether supply from the market, creating a supply crisis. This growing interest in staking is primarily due to the preference of large ether holders to generate passive income rather than liquidate their assets.
Recent Ethereum Upgrades Fuel Exodus
Another crucial factor is recent Ethereum updates. Following the introduction of the Merge update, which transitioned Ethereum to a proof-of-stake (PoS) consensus mechanism in September 2022, the rate of decline in ETH exchange reserves has accelerated.
Further fueling the exodus is the Shanghai update implemented on April 12, which has further boosted ethereum stakes. Staking rewards data reveals that approximately 18.91 million ETH worth $34 billion is currently staked across various platforms.
ETH Price Impact: Will It Soar or Crash?
Historically low exchange reserves suggest less selling pressure and bullish momentum, which could push ETH prices higher. Recent statistics support this speculation; ETH price has risen 2% in the last 24 hours, trading above the $1800 level.
Furthermore, the decrease in ether volatility and the decrease in trading volumes since the update have brought stability to ETH prices. However, the question remains, will this stability persist or are we on the verge of a price explosion?
Only time will tell if this record low balance on exchanges leads to a bull run or introduces an unexpected twist. As always, stay tuned for more exciting developments.
