Ethereum Balance on Exchange Hits New Lows, While ETH Holders Soar: Insights on Liquidity Trends

In recent weeks, a significant drop in Ethereum entry into exchanges has been observed, with new data highlighting a decline in Ethereum balances held on these platforms. Recent chart analysis from Glassnode Alerts has revealed that the current balance of Ethereum on the exchange has reached a new low, signaling a drop in overall liquidity within this trading platform.

According to data provided by Glassnode, the current ETH balance on the exchange is around 17.2 million, marking the lowest point observed in the last five years. This figure is much lower compared to January when the balance on the exchange exceeded 19 million, and even May when it surpassed 18 million. This downward trend indicates a decrease in available liquidity on the exchange.

However, it is important to note that a decrease in ETH on exchanges does not mean a decrease in the number of ETH holders. Despite the Ethereum outflow from exchanges, there has been a steady increase in the number of ETH holders, as the Santiment chart highlights. Currently, there are around 100 million individuals holding various amounts of ETH, with around 98.4 million reported at the end of April.

This decline in Ethereum balances on exchanges, coupled with the growth in the number of holders, can be attributed to two main factors: self-custody and staking. More and more people are opting for self-custody, which involves keeping their ETH in a private wallet rather than leaving it on a centralized exchange. This approach gives users greater control and security over their assets.

Additionally, staking has gained popularity, whereby users lock in a certain amount of Ethereum to participate in the network’s proof-of-stake consensus mechanism. Stakers receive rewards in the form of additional ETH for securing the network, which incentivizes users to hold their ETH in staking contracts rather than on exchanges. Currently, there are over 780,000 ETH deposits up for staking, and this number is growing.

Despite the decline of Ethereum on exchanges, the Ethereum ecosystem continues to grow. Data from DefiLlama reveals that Ethereum’s dominance in terms of Total Value Locked (TVL) remains strong, with a TVL of around $27.35 billion, accounting for more than half of all TVL. This influx of liquidity highlights the ongoing relevance and importance of ETH.

Moreover, CoinMarketCap data shows that ETH maintains its position as the second largest cryptocurrency by market cap, lagging behind Bitcoin. In the last 24 hours, ETH boasted the third highest trading volume, contributing over $3 billion to the total trading volume of the cryptocurrency market, which surpassed $19 billion.

At the time of writing, Ethereum is trading around $1,900, further solidifying its position as the leading digital asset on the market.

The recent drop in Ethereum balances on exchanges suggests a drop in overall liquidity, but is accompanied by a spike in the number of ETH holders. The shift towards self-custody and the growing popularity of staking are significant factors contributing to this trend. Despite the drop in exchange balances, Ethereum remains dominant in terms of Total Locked Value and trading volume, underscoring its continued relevance and importance in the cryptocurrency ecosystem.