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The balance of available Ether (ETH) on cryptocurrency exchanges fell to a five-year low on May 26, bringing the total amount of Ether held on exchanges to 17.86 million. Such a sharp decline in the ETH exchange supply has not been observed since April 2018.
According to Glassnode, only 14.85% of total Ether supply is currently held on centralized exchanges, compared to 25-26% of supply held during the 2021 bull run.
The drop in ETH supply began in September 2022, having declined significantly since the November FTX crisis. In addition to the decline in the exchange balance, Ethereum wallet addresses holding more than 100 ETH also dropped to a six-month low.
#Ethereum $ETH Number of Addresses Holding 100+ Coins just reached a 6-month low of 46,858
View metric:https://t.co/FbjiMG3uFX pic.twitter.com/uzHN7H2qRy
— glassnode alerts (@glassnodealerts) May 18, 2023
Two important events may have contributed to the decline in ETH balances on centralized exchanges in the recent past. First, the collapse of the FTX cryptocurrency exchange, which prompted many to move their crypto assets from exchange wallets to self-custody wallets; second, and most important, is the Shapella update.
Shapella gave way to thousands of validators to withdraw their ETH. However, contrary to popular belief, a minority of validators have chosen to opt out of staking, while the majority have withdrawn only their staking rewards.
The movement of assets from the exchanges is considered a bullish sign, indicating that traders are not going to sell at the current price. In the case of Ethereum, ETH restaking is the most obvious reason for the decrease in supply on the exchange.
Related: Ethereum price readings hint ETH may not sell off after Shapella hard fork
Major cryptocurrency exchanges such as Binance, Bitfinex, Kraken, and others that supported the Shapella update have experienced significant ETH outflows from their exchange wallets, resulting in lower current balances.
As previously reported, a week after the Shapella update, the amount of ETH staked exceeded the amount of ETH withdrawn. According to another report from Glassnode, less than 1% of staking ETH is expected to be traded. Thus, a significant part of the ETH leaving centralized exchanges has returned to staking.