Bitcoin, Ethereum On Exchanges Drop To New Lows, What A Supply Squeeze Would Mean For The Market

Scott Matherson

1 year ago

4 mins read

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Recent data shows that the supply of Bitcoin (BTC) and Ethereum (ETH) on exchanges has dropped significantly. This means the largest crypto tokens by market cap could be well-primed for significant moves to the upside, with a supply squeeze imminent.

Supply Of Bitcoin And Ethereum Drop To New Lows

BTC ECHO analyst Leon Waidmann shared Glassnode data, which showed that exchange balances for Bitcoin and Ethereum are at their lowest in years. Bitcoin’s supply on exchanges has dropped to 11.6%, while Ethereum’s supply has dropped to 10.6%. This suggests that crypto whales have been accumulating these crypto tokens and moving them to self-custody.

Waidmann highlighted the significance of this development, noting that a supply squeeze was imminent. This supply squeeze could help drive up the prices of Bitcoin and Ethereum since most investors look to be accumulating at the moment rather than offloading their holdings. In line with this, the analyst urged his followers to get “ready for the next big move.”

Interestingly, crypto analyst Ali Martinez suggested that this move might have begun following the approval of the Spot Ethereum ETFs. He stated in an X (formerly Twitter) post that almost 777,000 ETH ($3 billion) have been withdrawn from crypto exchanges since the Securities and Exchange Commission (SEC) approved these funds.

Once they finally launch, these Spot Ethereum ETFs are expected to kick the bull run into full gear. As such, it isn’t surprising that these crypto whales are looking to position themselves ahead of this development. Bloomberg analyst Eric Balchunas predicted these funds will likely begin trading by July.

However, research firm Kaiko has warned that these funds may not instantly send Ethereum’s price to new all-time highs (ATHs). The second-largest crypto token will likely face significant selling pressure thanks to the potential outflows from Grayscale’s Spot Ethereum ETF. This is based on the $6.5 billion outflows that Grayscale’s Spot Bitcoin ETF recorded in its first month of trading, which led to a significant decline in Bitcoin’s price.

ETH Could Hit A New All-Time High In Record Time

Crypto analyst Michael Nadeau suggested that Ethereum could still hit a new ATH once the Spot Ethereum ETFs begin trading faster than Bitcoin did following the launch of the Spot Bitcoin ETFs. He noted that Ethereum doesn’t have the same amount of “structure selling” that Bitcoin encounters since ETH validators do not have to sell their holdings to offset operating costs, unlike Bitcoin miners.

He also highlighted that 38% of Ethereum’s supply is locked on-chain and claimed that “ETH is more reflexive than BTC.” He further explained that this reflexivity is evident in how Ethereum leads in on-chain activity, which leads to more ETH burned. Considering this, Grayscale’s outflows may not impact Ethereum’s price as they did on Bitcoin’s price, which could cause the second-largest crypto token to hit a new ATH in no time.

Bitcoin price chart from Tradingview.com — BTC bulls reclaim control | Source: BTCUSD on Tradingview.com

Scott Matherson

Scott Matherson is a prominent crypto writer at NewsBTC with a knack for capturing the pulse of the market, covering pivotal shifts, technological advancements, and regulatory changes with precision. Having witnessed the evolving landscape of the crypto world firsthand, Scott is able to dissect complex crypto topics and present them in an accessible and engaging manner. Scott's dedication to clarity and accuracy has made him an indispensable asset, helping to demystify the complex world of cryptocurrency for countless readers.

Scott’s experience spans a number of industries outside of crypto including banking and investment. He has brought his vast experience from these industries into crypto, which allows him to understand even the most complex topics and break them down in a way that is easy for readers from all works of life to understand. Scott’s pieces have helped to break down cryptocurrency processes and how they work, as well as the underlying groundbreaking technology that makes them so important to everyday life.

With years of experience in the crypto market, Scott began to focus on his true passion: writing. During this time, Scott has been able to author countless influential pieces that have drawn in millions of readers and have shaped public opinion across various important topics. His repertoire spans hundreds of articles on various sectors in the crypto industry, including decentralized finance (DeFi), decentralized exchanges (DEXes), Staking, Liquid Staking, emerging technologies, and non-fungible tokens (NFTs), among others.

Scott’s influence is not just limited to the countless discussions that his publications have sparked but also as a consultant for major projects in the space. He has consulted on issues ranging from crypto regulations to new technology deployment. Scott’s expertise also spans community building and contributes to a number of causes to further the development of the crypto industry.

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Scott is known for his work in community education to help people understand crypto technology and how its existence impacts their lives. He is a well-respected figure in his community, known for his work in helping to enlighten and inspire the next generation as they channel their energies into pressing issues. His work is a testament to his dedication and commitment to education and innovation, as well as the promotion of ethical practices in the rapidly developing world of cryptocurrencies.

Scott stands steady in the frontlines of the crypto revolution and is committed to helping to shape a future that promotes the development of technology in an ethical manner that translates to the benefit of all in the society.

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