Ethereum Exits Exchanges, Signaling Potential Supply Squeeze
Over $3 billion worth of Ethereum (ETH), the world’s second-largest cryptocurrency, has been moved away from centralized crypto exchanges since the end of May. This exodus coincides with the approval of spot Ether ETFs (exchange-traded funds) in the United States, potentially indicating a coming supply squeeze.
Data from CryptoQuant reveals that the amount of Ether held on exchanges dropped by roughly 797,000 between May 23rd and June 2nd. This translates to a staggering $3.02 billion worth of Ethereum exiting these platforms.
Lower exchange reserves suggest a decrease in readily available coins for sale. Investors are likely transferring their Ether to personal wallets for safekeeping or other reasons besides immediate selling.
According to analyst Leon Waidmann of BTC-ECHO, data from Glassnode shows that the percentage of circulating Ether supply held on exchanges has sunk to its lowest level in years, currently sitting at just 10.6%.
ETFs on the Horizon, Price Surge Anticipated
Last week, Bloomberg ETF analyst Eric Balchunas expressed optimism about the possibility of Ether ETFs launching by the end of June. Some analysts predict a price surge for Ether once these spot ETFs begin trading, similar to the situation with Bitcoin following the launch of spot Bitcoin ETFs in January. This surge is expected due to increased buying pressure.
Crypto analyst Michael Nadeau, in a recent report, suggests that Ether might benefit from even greater demand pressures compared to Bitcoin. This is because Ether, unlike Bitcoin, doesn’t face the same level of “structural sell pressure.”
For instance, Bitcoin miners are often forced to sell their mined BTC to cover operational costs. Ethereum validators, on the other hand, don’t have the same ongoing expenses as Bitcoin miners.
Grayscale Factor and Market Concerns
However, some concerns exist regarding the potential impact of Grayscale’s Ethereum Trust (ETHE) on Ether’s price movement. This trust, managing a hefty $11 billion, could mimic the behavior of Grayscale’s Bitcoin Trust (GBTC). The GBTC witnessed a significant outflow of $6.5 billion in just the first month after relevant approvals.
Currently, Ethereum is trading at $3,781, down slightly over the past day and roughly 23% below its all-time high, according to CoinMarketCap.
