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Ethereum Outflows from Exchanges Continue Increasing Amid a Roaming Supply Squeeze

A holding tendency continues to be illustrated in the Ethereum network based on ETH outflows from crypto exchanges.

Journalist Colin Wu explained:

“According to glassnode, all exchanges continue to have negative net positions in Ethereum, and outflows of ETH continue to increase. The net outflows on July 24 reached the level at the end of September last year.”

It, therefore, shows that Ethereum has been leaving exchanges in droves. This is bullish based on market forces that price increases when supply drops and demand rises.

The demand for Ethereum has been on an upward trajectory based on the booming decentralised finance (DeFi) and non-fungible token (NFT) sectors. As a result, ETH has been settling three times more value on-chain than Bitcoin daily.

The neck-to-neck dominance battle between Ethereum and Bitcoin has been playing out. For instance, in late June, ETH’s daily active addresses surpassed Bitcoin for the first time in crypto history. Precisely, Ethereum’s daily active addresses shot up to 649,000, whereas those of Bitcoin stood at 580,000.

A supply squeeze is expected in the ETH network

According to a market analyst tweeting under the pseudonym 0xtendies:

“ETH leaving exchanges hit YTD high. Last time this happened BTC was $10K & ETH was $250. Supply squeeze coming.”

Therefore, supply is expected to diminish, which could prompt an upward momentum.

Meanwhile, Ethereum is expected to undergo a 90% daily emission reduction from 12,800 to 1,280, followed by ETH 2.0 upgrade. As a result, yearly inflation will be down from 4.3% to 0.43%.

Ethereum 2.0, also known as the Beacon Chain, was launched in December 2020 and was regarded as a game-changer that seeks to transit the current proof-of-work (POW) consensus mechanism to a proof-of-stake (POS) framework.

Ethereum Supply Diminishes to a Record Low Amid ETH Breaking the Record at $4,400

Cryptocurrencies have enjoyed a rollercoaster ride this quarter as they continue smashing records. Just over a week after Bitcoin hit an all-time high (ATH) of $66,900, Ethereum has followed its footsteps by breaking the record at the $4,400 level.

On the other hand, SHIB, a Dogecoin-inspired meme cryptocurrency, recently scaled the heights with a 46% increase in just a couple of days.

Therefore, it shows it is the crypto season as coins continue showcasing their potential.

Ethereum’s record-breaking surge is being attributed to diminished supply and high token circulation. Lucas Outumuro, the head of research at IntoTheBlock, explained:

“ETH price is breaking new highs while a record amount of 16.9K ETH was burnt in the past 24 hours. This also brings ETH’s issuance to a record low of -1.1%.”

Market insight provider Santiment added:

“Ethereum has just hit a new all-time high of $4,400 after reaching a massive token circulation output day of 1.74M ETH, creating the bullish divergence. On-chain metrics appear quite healthy for the number two coin by market value.”

Meanwhile, Ethereum supply in smart contracts recently reached a historic high of 28%. Smart contracts are self-executing agreements based on blockchain technology that decreases the demand for centralized intermediates. They have been in high demand in booming sectors like decentralized finance (DeFi) and non-fungible tokens (NFTs).

Total value locked in Ethereum 2.0 soars

More investments continue to trickle into the Ethereum 2.0 deposit contract because the total value locked (TVL) reached an ATH of 8,033,922 ETH.

Ethereum 2.0, also known as the Beacon Chain, was launched in December 2020 and was regarded as a game-changer that sought to transit the current proof-of-work (POW) consensus mechanism to a proof-of-stake (POS) framework.

ETH 2.0 is expected to improve scalability through sharding. Furthermore, it is touted to be more environmentally friendly and cost-effective.

With Ethereum hitting a record high, whether this is the start of the altcoin season remains to be seen.

Ethereum Supply on Exchanges Diminish to 12%, Signifying a Holding Culture

Despite retracing from an all-time high (ATH) price of $4,860 recorded earlier this month, Ethereum supply on exchanges continues to nosedive.

On-chain analyst Matthew Hyland confirmed:

“The amount of Ethereum supply on exchanges is crashing further down. Only 12% of the Ethereum supply is now left on exchanges.”

Whenever coins leave crypto exchanges, they are stored in cold storage or digital wallets for future purposes, which signifies a holding culture.

Ethereum is also being locked in booming sectors like non-fungible tokens (NFTs) and decentralized finance (DeFi) because it offers features like smart contracts. For instance, Ethereum takes the lion’s share in the total value locked (TVL) in DeFi, according to ranking and metrics provider DefiLlama.

Ethereum outweighs Bitcoin in terms of Google search interest in the US

According to market analyst Evan Van Ness:

“Over the last month, ETH has flipped BTC a few times in Google search interest in the US. The flippening is a series of many little flips before the permanent one.”

This shows that interest in Ethereum continues to gain steam because of various use cases. For instance, the Ethereum Name Service (ENS), a crypto domain based on the ETH blockchain, has generated revenue worth nearly 20 million since its launch in May 2017.

ENS can be regarded as the blockchain correspondent of the Domain Name System (DNS).

Furthermore, more participants are joining the ETH network, given that the number of non-zero Ethereum addresses recently reached an ATH of 68,756,137.

Meanwhile, the second-largest cryptocurrency ought to surge past the $4,600 level for new highs to be reached. Data analytic firm IntoTheBlock explained:

“On the resistance side, it appears that on the path to a new ATH, the most significant level of resistance is located around $4,653. Around that level, more than 489k addresses are holding 2.52m ETH. Surpassing that level might lead ETH towards new highs.”

With $5,000 forecasted as the largest open interest strike price for Ethereum options in 2021, whether this will be attained before the end of the year remains to be seen.

Massive Outflows and Burnt Ether Stimulate Ethereum Scarcity to Continue

Since the London Hardfork or EIP-1559 upgrade went live in August 2021, the supply of Ethereum continues to be depleted based on the burning mechanism incorporated.

The scarcity on the Ethereum (ETH) network continues going through the roof based on massive outflows from crypto exchanges. Data analytic firm IntoTheBlock confirmed:

“In just 38 days of 2022, here are a few key data points on how the supply available of Ethereum to buy is decreasing. – 453,890 ETH in outflows from exchanges (decreasing the exchange’s reserves). – 470,798 ETH has been burned.”

Source: IntoTheBlock

Scarcity was introduced every time Ether was burnt after being used in transactions. This mechanism triggers the narrative of Ethereum being deflationary because its value is expected to continue increasing with time on the foundation of slashed supply.

On the other hand, massive exchange outflows are bullish because they signify a holding culture, whereby coins are transferred to cold storage and digital wallets, making liquidation difficult.

Non-zero ETH addresses skyrocket

More participants are jumping on the Ethereum bandwagon, given that the number of non-zero addresses reached an all-time high (ATH) of 74,733,015, according to market insight provider Glassnode.

Source: Glassnode

This has contributed to Ethereum trading above the psychological price of $3,000. The second-largest cryptocurrency based on market capitalization was up by 19.45% in the last seven days to hit $3,196 during intraday trading, according to CoinMarketCap.

Meanwhile, the volume of Ethereum’s daily options trades reached historic highs by topping $1.1 billion at the end of January.

Source: Kaiko Derivatives

“Ethereum’s daily options trade volume broke all-time highs above $1.1 billion at the end of January and equalled Bitcoin’s for the first time last week,” according to crypto insight provider unfolded.