Ethereum ($ETH) Experiences Unprecedented Decrease In Exchange Supply

Jun. 3, 2023
Ethereum ($ETH) Experiences Unprecedented Decrease In Exchange Supply

Ethereum, the second-biggest market-value cryptocurrency, is witnessing a significant dynamic shift. The supply of Ethereum on exchanges has reached an unprecedented low of 9.9%. This trend reflects a growing interest and trust in self-custody within the crypto community.

According to Santiment, Ethereum’s migration to self-custody carries significant implications. Individuals secure their private keys, moving away from exchanges.

Furthermore, the renowned cryptocurrency analytics firm’s data highlights this trend in the Ethereum landscape. Investors favor long-term Ethereum holdings, tightening the market and increasing prices.

In simpler terms, the reduced supply on exchanges means fewer tokens are readily available for purchase. This can magnify the influence of higher demand on the price.

Exchanges offer convenience, but they are a single point of failure, risking hacking and system failures. However, there are alternative solutions available. Taking control of private keys shows sophistication and commitment to decentralization.

Moreover, this demonstrates a stronger dedication to the principles of the crypto movement. Crypto enthusiasts prioritize security and the ideology behind cryptocurrencies.

Ethereum’s positive momentum continues, as the average transaction fees have recently returned to more reasonable levels. This comes after a spike to $14 per transaction in May 2023.

Lower fees boost Ethereum’s utility, making it cost-effective for users to transact and engage with decentralized apps. This development fosters greater network usage and further enhances Ethereum’s value proposition.

Supporting the decline in supply on exchanges was the crypto trading platform KuCoin. In September 2021, for unclear reasons, it witnessed thousands of deposit addresses sending millions of dollars worth of Ethereum to a burn address.

This unusual event, spanning three days, involved over 3,500 transactions of Tether’s stablecoin, USDT, and Ethereum. Moreover, Ethereum’s upgrade, known as EIP-1559, implemented in 2021, introduced a mechanism to burn a portion of gas fees with each transaction.

Predictions & Recognition For Ethereum’s Potential

The Merge transformed Ethereum into Proof-of-Stake, reducing its supply. This upgrade caused a significant decrease in Ethereum’s total circulation. This decrease was primarily attributed to burned transaction fees.

The supply of Ethereum decreased by approximately $275 million, equivalent to 143,000 ETH. This deflationary trend was evident in May 2023, with 56,680 new tokens issued and 199,670 tokens burned, resulting in a negative supply growth of 1.46%. This deflationary nature of Ethereum could potentially boost its price if demand continues to rise.

As reported by VanEck, a global asset manager, Ethereum could reach a valuation of $11,800 by 2030 based on a comprehensive model that incorporates recent hard forks and its competition with US Treasury bills.

Using various assumptions and scenarios, the valuation model factors in Ethereum’s revenues, cash flows, and multiples. It also acknowledges Ethereum’s role as a store-of-value asset and a global settlement network for smart contract platforms.

In conclusion, Ethereum’s supply on exchanges has reached an all-time low, indicating a shift towards self-custody within the crypto community. Reduced transaction fees and ongoing developments in Ethereum’s network set the stage for potential price appreciation.

Related Reading | Crypto Exchange Bybit Ceases Operations in Canada Due to Regulatory Changes

Moreover, as more forecasts and awareness of Ethereum’s potential emerge, the world’s second-biggest cryptocurrency’s future appears bright. It’s ongoing growth and widespread use point to a promising future.

Rida Fatima

News writer
An ardent wordsmith with a rich five-year background in delving into the realms of finance and cryptocurrencies. Alongside curating captivating blogs, Unique's talents extend to crafting imaginative and engaging content.