Since the introduction of cryptocurrency-related spot exchange-traded funds (ETFs) in the United States, the supply of Bitcoin and Ethereum on centralized exchanges has reached record lows.
Bitcoin balances on exchanges fell to 11.6%, the lowest since December 2017, according to Glassnode data. Ethereum balances are even lower at 10.6%, the lowest since October 2015.
Spot ETFs trigger withdrawals.
Market experts explained that the decline in foreign exchange balances coincides with the Securities and Exchange Commission’s (SEC) approval of an ETF product for Bitcoin and the filing of a 19-b filing for Ethereum.
Spot Bitcoin ETFs have amassed 857,700 BTC (equivalent to $58.5 billion) in just five months, according to HeyApollo data. BlackRock’s IBIT ETF leads the acquisition with about $20 billion in assets, followed by Fidelity’s FBTC with about $11 billion.
The spot Ethereum ETF has not yet begun trading, but investor expectations have led to significant withdrawals. According to CryptoQuant data, 777,000 ETH worth about $3 billion has left exchanges since SEC approval.
Additionally, the option to stake ETH has had an effect on reducing exchange balances. Nansen reports that 32.8 million ETH, or 27% of the total supply, is currently staked to support the network.
Is there a supply crisis underway?
Market experts predicted that if the downward trend in exchange rates continues, demand for Bitcoin and Ethereum could lead to a supply crunch.
In a recent social media post, BTC Echo editor Leon Waidmaan advised investors to prepare for a “supply squeeze” and the possibility of the “next big move.”
Historically, when digital assets are withdrawn from exchanges, investors plan to hold rather than sell, reflecting optimistic sentiments and expectations of future growth. Supply shortages could have a significant impact on prices by limiting available supply, potentially leading to significant price increases if the current accumulation trend continues.