Ethereum Exchange Supply Plummets: DeFi, FTX Crisis, and Shapella’s Influence

Sunset over a futuristic cityscape, Ethereum logo glowing in the sky, dwindling piles of coins on crypto exchange platforms, DeFi buildings standing tall, FTX crumbling, people happily moving coins to self-custody wallets, Shapella light cast upon staking validators, serene & positive mood.

Ethereum enthusiasts have recently observed a notable decline in the exchange supply of ETH across centralized crypto exchanges. The available balance of Ether has plummeted to a 5-year low, with only 14.85% of the overall supply currently held by centralized exchanges. This is a stark contrast from the 25-26% held during the bull run in 2021.

The decline in Ether supply on exchanges commenced around September 2022 and saw a significant dip following the FTX crisis in November. Apart from the decrease in exchange balances, the number of Ethereum wallet addresses holding over 100 ETH has dropped to a six-month low.

There are two recent events likely to have contributed to this decline. First is the downfall of FTX crypto exchanges, prompting many users to transfer their crypto assets from exchange wallets to self-custody wallets. The second, more significant factor is the Shapella upgrade which allowed thousands of validators to withdraw their staked ETH after two years.

It is worth mentioning that only a small portion of validators decided to unstake, while the majority merely withdrew their staking rewards. The migration of assets away from exchanges is typically considered a bullish indicator, as it implies that traders are not interested in selling at the current price. For Ethereum, the primary reason behind the dwindling exchange supply is re-staking ETH.

Top exchanges like Binance, Bitfinex, and Kraken experienced a substantial outflow of ETH from their wallets because of the Shanghai upgrade, contributing to the current balance decline. It is important to note that after the Shapeela upgrade, the number of Ether being staked surpassed the number of ETH being withdrawn.

A Glassnode report also estimated that less than 1% of staked ETH would be sold, resulting in a significant share of Ether moving away from centralized exchanges and back into staking. This phenomenon reflects promising signs for Ethereum’s future stability, with more users showing faith in the long-term growth and value of the cryptocurrency.

Source: Cointelegraph

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