No ETH to trade? Ethereum exchange balance drops to a 5-year low

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The balance of available Ether (ETH) across crypto exchanges dropped to a 5-year low on May 26, bringing the total amount of Ether held on exchanges to 17.86 million. The drastic decline in the exchange supply of ETH was not seen since April 2018.

According to Glassnode data, only 14.85% of the total Ether supply is currently held on centralized exchanges. This is quite a decline compared to the 25-26% supply held during the 2021 bull run.

The decline in Ether exchange balance. Source: Glassnode

The drop in Ethereum supply began in September 2022 and saw a major dip after the FTX crisis in November. Apart from a drastic decline in the exchange balance, Ethereum wallet addresses holding more than 100 ETH has also declined to a six-month low.

The decline in ETH balances on centralized exchanges could be influenced by two very significant events in the recent past. The first is the downfall of FTX crypto exchanges, prompting many to move their crypto assets away from exchange wallets to self custody wallets and the second and most important of the two developments is the Shapella upgrade.

Shapella upgrade made way for thousands of validators to withdraw their staked ETH after two years. However, contrary to popular belief, only a minor chunk of validators decided to unstake while the majority of the validators only withdrew their staking rewards.

The movement of assets away from exchanges is considered a bullish sign as it indicates traders are not looking to sell at the current price. In the case of Ethereum, re-staking ETH has been the most prominent reason for the declining exchange supply.

Related: Ethereum price metrics hint that ETH might not sell off after the Shapella hard fork

Major crypto exchanges such as Binance, Bitfinex, Kraken and several others that supported the Shanghai upgrade saw a significant outflow of ETH from their exchange wallets leading to the current balance decline.

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ETH withdrawal from crypto exchanges. Source: Nansen

As Cointelegraph reported earlier, just within a week of the Shapeela upgrade, the number of Ether being staked surpassed the number of ETH being withdrawn. Another report from Glassnode had estimated that less than 1% of staked ETH was expected to be sold. Thus a significant chunk of Ether moving away from centralized exchanges went back into staking.

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Source: Cointelegraph