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Diminishing Ether supply on exchanges may signal an incoming price rally driven by a “supply shock,” which occurs when strong buyer demand meets decreasing available ETH.
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Ether reserves across centralized exchanges hit an almost nine-year low, reinforcing investor optimism for a potential market bottom that may start a recovery toward the $3,000 psychological mark.
Ether (ETH) reserves across all exchanges fell to 18.95 million on Feb. 18, marking their lowest level seen since July 2016 when Ether was trading around $14, CryptoQuant data shows.
Ether exchange reserves, all exchanges, all-time chart. Source: CryptoQuant
Diminishing Ether supply on exchanges may signal an incoming price rally driven by a “supply shock,” which occurs when strong buyer demand meets decreasing available ETH, leading to price appreciation.
ETH/USDT, Year-to-date chart. Source: Cointelegraph/TradingView
However, Ether has struggled to gain momentum over the past year, falling over 3.67% on the yearly chart and declining over 19% year-to-date (YTD), TradingView data shows.
Related: Ether traders eye growth as options market leans bullish
Ether moving off exchanges is a “bullish” signal
The diminishing Ether supply on exchanges suggests investors are moving their ETH into cold storage wallets for long-term holding.
Ether supply moving off exchanges is a “generally bullish” signal, according to Nicolai Sondergaard, research analyst at Nansen crypto intelligence platform.
The analyst told Cointelegraph:
“We are seeing similar trends for BTC, which makes me think if we a) are seeing demand outpaces supply and, or, b) is this a natural shift toward self-custody and cold storage.”
“Regardless, I see it as being positive for both, even if the above reasons likely aren’t the only factors in this shift,” added the analyst
Still, Ether faces significant resistance at $2,750 and $2,800.
ETH Exchange Liquidation Map. Source: CoinGlass
A potential Ether rally above $2,800 would liquidate over $822 million worth of leveraged short liquidations across all exchanges, CoinGlass data shows.
Related: 2.5M Bitcoin left on crypto exchanges signals “supply shock”
The next Ether price catalyst
The potential introduction of staking for Ether exchange-traded funds (ETFs) may also be a catalyst for ETH price, according to Marcin Kazmierczak, co-founder and chief operating officer at Redstone:
“The potential introduction of staking ETFs could be a game-changer, further tightening Ethereum’s liquid supply and reinforcing its value proposition as a prime investment asset.”
Ether ETF issuers are expecting regulatory approval for staking, according to Consensys founder Joe Lubin.
Magazine: Ethereum L2s will be interoperable ‘within months’: Complete guide
This article first appeared at Cointelegraph.com News
