ETH on exchanges at 5-year low as capital continues to flee crypto

Key Takeaways

• Only 15% of ETH is on exchanges, the lowest number in 5 years 
• Drop has been swift since staking opened up in late 2020
• Bitcoin and stablecoins have also fled exchanges, meaning liquidity is thin
• Volatility has risen as a result, with aggressive moves to the downside also possible, despite bullish first quarter for market as a whole

Ethereum has had an eventful few years. 

Obviously, it was tossed around violently in line with the rest of the crypto market. Bouncing around the $100 or $200 levels for a lot of 2018 to 2020, it suddenly thrust upwards during the pandemic, getting close to $5,0000 in late 2021 before crashing back down below $1,000. 

Crypto is fleeing exchanges

While price is all there is to talk about for the vast majority of crypto projects,  I don’t want to focus on that here. Let’s look at the supply of ETH on the market.

I published a deep dive recently looking at how capital has fled the crypto markets at large, with 45% of the stablecoin balance on exchanges exiting in the last four months, the toal balance now the lowest since October 2021. 

This pattern is being followed with cryptocurrencies across the board. Bitcoin has only 11.8% of its supply on exchanges, the lowest since the bull market top five years ago. Looking at Ethereum, there has been a rapid decline in the supply on exchanges, now the lowest in 5 years at 18.1 million ETH. 

Or, looking at the percentage of the total supply, there is now only 15% of ETH on exchanges. 

Ethereum staking could change all this

With Ethereum, however, there is an elephant in the room. Namely, the ETH staking contract that was opened up in November 2020. This allowed users to lock up their ETH in anticipation of the Merge, Ethereum’s transition to a proof-of-stake network, which eventually went live last September. 

Stakers only got access to their tokens last week, however, as the Shanghai upgrade went live. And when you plot the amount of ETH locked up in the staking contract compared to the ETH on exchanges, it is a clear factor. 

Nonetheless, that ETH is now live again. Or at least, stakers can choose to withdraw it if they like. The early diagnosis is that there hasn’t been any extra selling pressure, with ETH leading the crypto market post-Shanghai and breaking past the $2,000 barrier for the first time since May…