Ethereum balances have continued to fall, as they did earlier this year. The decrease in the number of coins held on centralized exchanges indicates a favorable feeling among the digital asset’s huge holding base. Despite the asset’s price increasing in recent weeks and reaching new all-time highs since then, ETH held on exchanges has continued to fall.
According to Glassnode data, Ethereum exchange reserves have dropped to new lows. The chart demonstrates that this has been a long time in the making since the downtrend has not wavered into the year 2021. The price of the digital asset and centralized exchange balances have been found to be inversely connected, with the latter falling while the former rising.
There are presently 14,241,063 ETH on exchanges, representing 12% of the entire Ethereum supply. The last time volumes were this low in 2018, following the end of the bull market.
In 2019, exchange reserves increased again, and this trend is expected to continue into 2020. Despite high prices, volumes fell at the start of the bull run, which began near the end of 2020.
In the past, coins on exchanges have tended to fall, primarily during bad markets when investors are grabbing as much crypto as they can. During this bull market, exchange balances have been falling. This contradicts previous market practice, in which investors would move their assets to exchanges to profit.
Several causes have contributed to this drop. The growth of decentralized finance is one example. A significant chunk of Ethereum leaves centralized exchanges for decentralized exchanges, where users may put their currencies to work for them and generate passive revenue. Services such as staking and yield farming have grown commonplace, allowing investors to store their coins while earning a substantial income.
Another explanation is the increase in investor optimism. The repeated bull rallies of 2021 have shown what the cryptocurrency market is capable of. Investors have discovered that holding their coins increases their chances of receiving larger returns. Furthermore, the cryptocurrency sector is still in its infancy. As a result, speculators are stockpiling the coins in anticipation of even stronger market conditions.
Ethereum is not the only digital asset with diminishing controlled exchange balances. Throughout the bull run, top cryptocurrency Bitcoin has seen its exchange reserves plunge, indicating the start of a supply shock.