Ethereum continues its recovery phase, with the asset currently trading above $1,800 after rising about 15.3% in the past two weeks. Despite concerns from investors and a decline in public enthusiasm, ETH seems to have demonstrated resilience.

The latest asset volatility reflects renewed buying interest, and some on-chain indicators are signaling potential upward price momentum in the future. One of those indicators relates to ETH supply on exchanges.

Decreasing exchange supply signals reduced selling pressure

A recent analysis by Amr Taha, a contributor to the QuickTake platform of CryptoQuant, indicates a significant drop in Ethereum's Exchange Supply Ratio on Binance — a metric that tracks the amount of ETH held on this platform compared to its circulating supply.

According to Taha, this ratio has now reached a multi-week low, signaling that an increasing amount of Ethereum is being withdrawn from Binance, likely being transferred to cold storage protocols or decentralized finance (DeFi).

Taha explains that the decrease in this exchange supply ratio historically indicates reduced selling pressure, as users tend to withdraw assets when they plan to hold or deploy them in alternative protocols rather than sell.

The development is particularly noteworthy on Binance, which remains the largest cryptocurrency exchange by volume and liquidity. Therefore, changes in ETH reserves on this exchange can often reflect broader market sentiment shifts.

To illustrate this trend, Taha points to a similar case in April when the supply of ETH on the Binance exchange plummeted, causing the price to rise from below $1,700 to around $1,950, a 14% increase in just a few days.

Analysts believe that the current model may be laying the groundwork for similar developments, especially when considering what is happening on the derivatives market.

Ethereum's Short Squeeze setup appears at $1,900–$2,000

The liquidation heatmap shows the presence of an increasing group of short positions between $1,900 and $2,000. According to Taha, this active short interest layer creates a price zone that could increase if those positions are forced to close in a short squeeze.

Particularly, if ETH rises within that range, the resulting liquidations could amplify upward momentum. In this scenario, the cost to push ETH prices higher will decrease as available supply on exchanges continues to dwindle.

Taha notes that the combination of a declining exchange balance and rising short interest creates favorable conditions for what he describes as a 'liquidity hunt' — a situation in which prices are pushed up to trigger liquidations and capitalize on trapped positions.

With the current price momentum of ETH and decreasing selling resistance, the range from $1,900 to $2,000 is increasingly becoming the focal point.