On-chain data shows that Ethereum’s exchange supply ratio continued to trend around 2016 lows, a sign that could be bullish for ETH.
Ethereum exchange supply ratio has been at its lowest recently
In a CryptoQuant Quicktake article, an analyst talked about the recent trend in Ethereum Exchange’s supply ratio. “Exchange Supply Ratio” is an on-chain metric that tracks the ratio of ETH’s exchange reserve to its total circulating supply.
“Exchange reserve” here refers to a measure of the total amount of cryptocurrency that is currently in wallets connected to centralized exchanges.
When the value of this indicator increases, it means that investors are depositing their coins on exchanges. Since one of the main reasons holders transfer to these platforms is for selling purposes, this type of trend can have a bearish effect on the price of the asset.
On the other hand, the declining metric suggests that a net amount of supply is exiting trade. Typically, investors withdraw their coins to self-custodial wallets whenever they plan to hold them for the long term, so such a trend may prove bullish for ETH.
Now here is the chart shared by the quant which shows the trend of Ethereum’s exchange supply ratio over the last decade:
The value of the metric appears to have been stale in recent months | Source: CryptoQuant
As shown in the chart above, Ethereum’s exchange supply ratio reached a peak in 2020. During this peak, exchanges held over 30% of the total circulating supply of the active.
Since then, however, the indicator has been in constant decline, despite the fact that the supply of the asset has increased. This means that investors have been withdrawing coins at a rate greater than the supply expansion.
This year, the indicator has trended sideways, suggesting that a balance has been achieved in the sector. Interestingly, this stable action has occurred despite the price appreciation that Ethereum is enjoying.
This trend would naturally imply that few investors in cryptocurrency are yet ready to part with it. At the same time, however, constant accumulation like before is also not happening, so it’s not like there are no sellers at all.
Still, the fact that the indicator has at least remained balanced throughout this rally could be a positive sign for its sustainability. This indicator could now be one to watch in the future, just to make sure the trend continues.
Of course, any upside reversal would indicate that investors have started selling, which could mean that Ethereum’s bull run could be nearing its peak.
BTC Price
At the time of writing, Ethereum is trading around $3,600, up over 9% from last week.
Looks like the price of the coin has been moving up over the last few days | Source: ETHUSDT on TradingView
Featured image of Dall-E, CryptoQuant.com, chart from TradingView.com
