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Breaking News: Coinbase Confirms DOJ Investigation Following Major Security Incident

How Ethereum low supply on exchanges could drive up ETH price

Reynaldo Marquez
Reynaldo Marquez
4 years ago
2 mins read
Ethereum Price

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Research firm Santiment has determined that Ethereum’s supply radius on exchange platforms is at a 28-month low. With 20.1% of ETH in its reserves, the last time the metric was at similar levels was in November 2018.

Ethereum ETH
Source: Santiment

Above is a look at the relationship between the increase in Ethereum supply on the exchanges and fluctuations in its price. ETH’s rally in recent months corresponds to a sustained decline in this metric.

Ethereum is trading at $1,808 with bearish performance in the 24-hour chart. However, in the last hour ETH is showing an uptrend with 0.3% gains, after a week of negative performance. If the cryptocurrency manages to stay above the current level it could gain more momentum and go after resistance at $1,850.

Ethereum breaking above $1,800. Source: ETHUSD Tradingview

Where is Ethereum’s demand coming from?

Two sectors are currently taking a big part of ETH’s supply. Data from DeFi Pulse register 9,4 million ETH locked in DeFi protocols. After registering a drop at the end of February, ETH inflows into decentralized finance protocols have absorbed 1.5 million ETH since March 8.

This trend is continuing and shows no signs of weakening, as more and more users join the sector for profits or to participate in the Non-Fungible Token (NFT) craze.

Ethereum ETH
Source: DeFi Pulse

MakerDAO, Compound y Sushiswap hold the biggest amount of ETH with 3 million and 1.4 million each, respectively. Uniswap, Aave, Alpha Homora, and Balancer follow, but only the decentralized exchange (DEX) holds over 1 million ETH.

On the other hand, Ethereum 2.0 deposit contract has also absorbed a lot of ETH supply. At the moment, it holds 3,559,362 ETH with an estimated value of $6 billion. According to Arcane Research, more institutional demand has come for ETH since late 2020:

the steady increase in ETH loans outstanding. After ending Q1 at 5.5%, the share of ETH loans outstanding grew 177% over the next three quarters, ending the year at 15.5%. Of course, some of this growth is attributable to ETH’s price inflation.

Sustained demand for ETH could positively impact its price and allow the rally to continue through 2021. According to ETH Gas Station, transactions fees on the blockchain are again at record levels with 161 Gwei for the cheapest.

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Reynaldo Marquez
Reynaldo Marquez

Reynaldo Marquez

A literature major, Reynaldo Márquez has been deeply immersed in the crypto industry since 2017. His journey began with translating articles for various crypto news outlets, a role he took on with zeal. In 2018, amidst a challenging market, he embraced his first writing assignment, demonstrating his unwavering commitment to the nascent industry and the promise of change it bears for many people worldwide.
In March 2021, he joined the prestigious crypto news outlet NewsBTC and Bitcoinist, where he not only reported on the latest crypto news but also had the privilege of interviewing some of the industry's most influential figures. A year later, his dedication and hard work were recognized, and he was promoted to Managing Editor, a position he currently holds with pride.
He believes in honesty, good communication, hard work, and the power of cryptocurrency and its potential to transform people's lives, especially those alienated by the legacy financial system. Born in 1992 in Venezuela, Reynaldo is familiar with how governments and central banks can negatively affect people, their everyday lives, and their futures by creating inflation and erasing their hopes for a better future. Thus, like many Venezuelans, he embraced this new technology to help him and his family navigate difficult times.
In another life, Reynaldo would have pursued a career as an investigator, most likely tracking down the origins of the Cyberpunk movement with the publication of William Gibson’s ‘Neuromancer.’ The intersection between fiction and reality, with the materialization of Bitcoin in 2009, would have allowed him to dive deep into the crypto sphere as something more than a financial phenomenon but also a cultural shift in society that was brewing since the XX century, and maybe even sooner, in the XIX century with the publication of Henry David Thoreau’s ‘Civil Disobedience.’
But that’s for another life. In this one, Reynaldo has been trading to improve his trading skills. Since 2023, he has been trying to learn Python to create successful strategies and find ways to execute them. It is a difficult task, which continues to keep him busy today and will most likely continue to keep him busy in the near and long term.
In his free time, he enjoys lifting heavy objects, reading, watching movies, and listening to his favorite music. Some of his favorite authors are Walt Whitman, William Faulkner, Allen Ginsberg, James Baldwin, Raymond Carver, Ray Bradbury, George Orwell, Mario Vargas Llosa, Reinaldo Arenas, Rafael Cadenas, and many others. Lately, he has been primarily interested in reading about dystopic societies, a topic that deeply resonates with the crypto industry.
Since 2023, he has lived in Spain with his wife. He loves the weather, the food, and the people and their culture. They both expect to travel much more within the country they now call home and beyond its border. He hopes to retire with his wife, maybe in a quiet place near a beach, but most likely in a city close to a library and a university with his kids and, hopefully, grandkids.

Disclaimer: The information found on NewsBTC is for educational purposes only. It does not represent the opinions of NewsBTC on whether to buy, sell or hold any investments and naturally investing carries risks. You are advised to conduct your own research before making any investment decisions. Use information provided on this website entirely at your own risk.

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