On-chain data shows that the Ethereum exchange supply ratio continues to remain flat near its 2016 lows, which could be a positive sign for ETH.
Recently, the Ethereum exchange supply ratio hit its lowest level.
In a CryptoQuant Quicktake post, the analyst talked about the recent trends in the Ethereum Exchange Supply Ratio. “Exchange Supply Ratio” is an on-chain indicator that tracks the ratio between ETH’s exchange reserves and total circulating supply.
Here, “exchange holdings” refers to the total amount of cryptocurrency currently held in wallets connected to a centralized exchange.
If the value of this indicator increases, it means that investors are depositing their coins on the exchange. Since one of the main reasons holders are moving to these platforms is for selling-related purposes, this trend could have a bearish impact on asset prices.
On the other hand, a declining indicator indicates that net supply is leaving the exchange. This trend may turn out to be positive for ETH as investors generally place their coins into self-managed wallets whenever they plan to hold them for the long term.
Now here is a chart shared by the quant showing the trend of Ethereum exchange supply ratio over the last 10 years:
The value of the metric appears to have been stale in recent months | Source: CryptoQuant
As shown in the graph above, Ethereum exchange supply ratios hit record highs in 2020. During this peak, exchanges held over 30% of the asset’s total circulating supply.
However, despite the subsequent increase in asset supply, the indicator continues to show a downward trend. This means that investors were pulling out coins at a rate that exceeded the expansion in supply.
This year, the indicator has fallen in a sideways movement, suggesting that the sector has reached equilibrium. Interestingly, this monotonous action comes despite the price growth that Ethereum is enjoying.
This trend naturally suggests that there are not many cryptocurrency investors yet. However, at the same time, there is no consistent accumulation as before, so it does not mean that there are no sellers at all.
Nonetheless, the fact that the indicators have at least remained balanced throughout this rally could be a positive sign for sustainability. Now it could be an indicator to keep an eye on the future to see if the trend continues.
Of course, a bullish reversal is a sign that investors have started selling, which could mean that the Ethereum bull market is nearing its peak.
BTC price
As of this writing, Ethereum is trading at around $3,600, up more than 9% over the past week.
Looks like the price of the coin has been moving up over the last few days | Source: ETHUSDT on TradingView
Dall-E, featured image from CryptoQuant.com, chart from TradingView.com