Data shows that nearly 90 percent of Ethereum supply has left cryptocurrency exchanges for cold wallets or staking polls. This is the largest since 2015.
It is worth noting that consumers have started moving their Ethereum holdings en masse to self-custody addresses since September last year. A process that was intensified in November during the FTX meltdown, which undermined the trust in centralised platforms.
A similar scenario also played out with Binance on Tuesday when more than 3000 BTC was withdrawn within 24 hours from the platform following a threat from the U.S. Commodity Futures Trading Commission (CFTC) to sue the exchange for allegedly violating trading regulations.
Investors often tend to move their digital assets from centralised exchanges to cold wallets at the slightest controversy.
According to on-chain analytics provider Santiment, the total supply of ETH held on exchanges is currently at its lowest level since July 2015, with only 10.31% of existing ETH available. The remaining almost 90% of Ethereum is being held by wallets controlled by users.
A low proportion of ETH on exchanges means that if significant buying pressure were to be seen on the market, the cryptocurrency’s price would likely go up, as there is little supply readily available to satisfy demand.
Investors King understands that other factors responsible for this trend include the transition of Ethereum network from a Proof-of-Work (PoW) consensus algorithm into a Proof-of-Stake (PoS) consensus algorithm.
In addition, Ethereum staking has been seen as a source of revenue for both cryptocurrency holders and exchanges. These platforms offer users a staking service allowing them to maintain liquidity by locking their ETH on-chain to earn rewards.
Another tenable reason is that investors are starting to see Ethereum as a potential long-term investment vehicle, much like Bitcoin. This is evident in the growing number of holders, who are holding onto their Ethereum for the long term, as opposed to trading it on cryptocurrency exchanges.