Despite ETH's annual all-time-high, there is less and less ether on exchanges. Supply is becoming increasingly scarce. What's behind this trend?

Last week, the price of ether broke through the psychologically important $3,000 barrier and is gradually moving further upward toward Ethereum's all-time high. At the same time, ETH positions on exchanges around the world continue to fall. In the past three months alone, investors have pulled about 865,000 ETH from the exchanges. Percentage-wise, only 11.14 percent of all Ethereum assets remain on crypto exchanges, the lowest figure since late 2015. Back then, today's second-largest cryptocurrency was still in its infancy, while it now has a market capitalization of more than $400 billion.

The trend of this shortage is even clearer if you look at the phenomenon for longer. More than 11 million ethers have flowed off centralized exchanges since the FTX scandal came to light in the fall of 2022. Bitcoin has also been showing a trend for self-preservation by disciplined hodlers for some time, but in the case of Ethereum, the situation is even more intense thanks to the staking option involved. Currently, more than a third of all Ethereum coins are enshrined in smart contracts, which speaks to the strength of the ecosystem.

What the supply shortage on exchanges means

During the peak in August 2020, there were about 33.5 million ETH on various crypto exchanges. Since then, more than 20 million ETH have been transferred. Never before has there been such a supply shortage of Ether on the exchanges. What makes it positive is that there were also declining exchange holdings before and during the bull runs in 2017 and 2021. The current even stronger trend can therefore be seen as a positive sign for the future.

According to optimistic predictions, the sharply reduced supply of the second-largest cryptocurrency on the exchanges could be met with a surge in demand from institutional investors as early as May. The SEC will then have to make an initial final decision on an ETH ETF application involving the VanEck fund. If the U.S. Securities and Exchange Commission approves the ETH ETF applications, billions of U.S. dollars could flow into the market from major investors. Recently, U.S. crypto exchange Coinbase gave 5 reasons in favor of the Ether ETF in an open letter to the SEC.