Recent data has revealed a significant drop in the supply of Bitcoin (BTC) and Ethereum (ETH) on exchanges. This decrease indicates that the two largest crypto tokens by market cap are potentially gearing up for substantial upward movements, as a supply squeeze looms. According to BTC ECHO analyst Leon Waidmann, Glassnode data shows that the exchange balances for both Bitcoin and Ethereum are currently at their lowest levels in years. Bitcoin’s supply on exchanges has fallen to 11.6%, while Ethereum’s supply has decreased to 10.6%. This trend suggests that major crypto holders, or whales, have been accumulating these digital assets and transferring them to self-custody.
Waidmann emphasized the importance of this development, highlighting that a supply squeeze is on the horizon. The potential supply squeeze could potentially drive up the prices of Bitcoin and Ethereum, as it appears that most investors are in an accumulation phase rather than selling off their holdings. In light of this, the analyst advised his followers to prepare for what could be a significant price movement in the near future.
Notably, crypto analyst Ali Martinez suggested that this recent shift in the market dynamics may have been influenced by the approval of Spot Ethereum ETFs. Martinez mentioned in a post on X (formerly Twitter) that nearly 777,000 ETH (equivalent to $3 billion) have been withdrawn from crypto exchanges following the approval of these funds by the Securities and Exchange Commission (SEC). The impending launch of these Spot Ethereum ETFs is expected to propel the cryptocurrency market into a full-fledged bull run. Consequently, it is understandable why crypto whales are positioning themselves ahead of this significant development. Bloomberg analyst Eric Balchunas even predicted that these ETFs will likely commence trading by July.
Despite the optimism surrounding the introduction of Spot Ethereum ETFs, research firm Kaiko has issued a word of caution. According to their analysis, these funds may not immediately propel Ethereum to new all-time highs (ATHs). The second-largest cryptocurrency could face substantial selling pressure due to potential outflows from Grayscale’s Spot Ethereum ETF. This concern is rooted in the $6.5 billion outflows that Grayscale’s Spot Bitcoin ETF experienced in its initial month of trading, leading to a considerable drop in Bitcoin’s price.
Ethereum’s Unique Traits
Crypto analyst Michael Nadeau provided insights into why Ethereum may still be poised to reach new ATHs, despite the potential challenges brought about by the launch of Spot Ethereum ETFs. Nadeau noted that Ethereum could achieve this milestone faster than Bitcoin did following the introduction of Spot Bitcoin ETFs. Unlike Bitcoin miners who often sell their holdings to cover operational expenses, ETH validators do not face the same pressure to sell, leading to a different market dynamic. Furthermore, Nadeau highlighted that 38% of Ethereum’s supply is locked on-chain, indicating that ETH is more reflexive than BTC. This reflexivity is evident in Ethereum’s leadership in on-chain activities, which translates to more ETH being burned in transactions.
The decreasing supply of Bitcoin and Ethereum on exchanges, coupled with the anticipated launch of Spot Ethereum ETFs, sets the stage for potential growth in the crypto market. While challenges may arise, particularly for Ethereum, the unique characteristics of each cryptocurrency could influence their price trajectories in the coming months. Investors and observers alike should stay vigilant and prepared for the dynamic shifts that lie ahead in the digital asset space.