Ethereum shows signs of supply restriction, as several on-chain indicators point to a reduction in supply. One of these indicators is the supply of ETH on exchanges, which recently fell to 7.3 million ETH, its lowest level since 2015.
The drop in supply indicates several things. First, traders are withdrawing their tokens from exchanges and transferring them to cold wallets, alleviating immediate selling pressure. Second, the decrease in supply could also indicate greater use of the Ethereum network as ETH gains utility.
Crypto analyst CryptoGoos on X noted that the Ethereum blockchain was effectively recording an increase in activity after leading all networks in bridged network flows in the last 24 hours.
Traders may also be transferring ETH tokens from centralized exchanges to staking platforms, demonstrating their willingness to hold them long-term. BeaconChain data shows that the amount of ETH in staking has increased to 34,694,490 ETH, the highest figure in history.
As staking activity increases, the implications for the price of Ethereum could be positive, as more tokens are withdrawn from exchanges. Since retail and institutional traders seek to acquire the available ETH tokens on platforms, this could lead to an explosive move.
Ethereum whales have been actively accumulating ETH tokens. Addresses with more than 10,000 ETH tokens have significantly expanded their positions, and their holdings have increased by 1.28 million in one month. The total supply controlled by these wallets has risen from 25.23 million tokens on May 14 to 26.52 million.
In addition to whales, institutions are also buying ETH. Sharplink Gaming acquired 176,271 ETH tokens valued at over 463 million dollars, making it the largest publicly traded holder of Ethereum. Spot ETH ETFs have also experienced one of the longest streaks of inflows.
When large traders buy when there are fewer ETH tokens available on exchanges, the likelihood of a supply restriction increases.
An imminent supply shortage is generally bullish for the price of Ethereum, as it coincides with an increase in demand. As more ETH leaves exchanges, the price becomes sensitive to rising demand. Therefore, as accumulation continues, the price of ETH could see notable gains and possibly reach $4,000.
The supply shortage could also coincide with breakout conditions. The price of Ethereum broke a 30-day range while buyers and sellers remained on the sidelines. However, ETH retraced to this consolidation range during the recent cryptocurrency downturn. The imminent supply shortage could be the catalyst for a price breakout.
In summary, Ethereum could be at a turning point as the supply available on exchanges falls to historic lows. Meanwhile, whales and institutions are eagerly buying ETH tokens, which could trigger an explosive move.
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