Ethereum holders might be excited to learn about the stock market equilibrium

  • The Ethereum exchange balance hit a five-year low as more holders shifted their wealth to self-custody options and DeFi platforms.
  • The decline in FX balances can be attributed to factors such as the rise of DeFi, the shift to PoS, and the downturn in the crypto market.

The start of the year ushered in a whirlwind of events that significantly impacted the crypto industry, with Ethereum (ETH) being no exception.

The current state of affairs, including SEC regulatory action and possible bank runs, has undoubtedly left ETH holders disillusioned. However, other factors could also be to blame for the dwindling ETH exchange balance.

Read Ethereum [ETH] Price prediction 2023-24

The Ethereum exchange balance is falling

In 2022, the FTX crash sent shockwaves through the crypto world, leading many holders to question the safety of storing their assets on exchanges.

The incident sparked renewed interest in self-custody to secure crypto holdings. However, while Ethereum saw currency balances fall in the months following the crash, this trend can be attributed to factors other than fears of currency uncertainty.

Ethereum exchange netflow blinking negative

According to a recent Glassnode chart by Glassnode Alertsthe balance of Ethereum held on exchanges has steadily decreased.

At the time of this writing, the FX balance had hit a five-year low and was hovering just over $18 million. This trend suggests that more ETH holders are choosing alternative storage methods rather than keeping their assets on exchanges.

Source: Glassnode

Furthermore, a closer examination of Ethereum exchange net flow shows that ETH outflow from exchanges has exceeded inflow, with few exceptions of inflow spikes.

Currently, the net flow of ETH on exchanges remains negative, with outflow continuing to dominate. At the time of writing, the net flow had already surpassed 11,000 ETH, underscoring the ongoing trend of ETH holders moving their assets away from exchanges.

Source: CryptoQuant

Possible reasons for declining exchange balances

One possible factor is the rise of decentralized finance (DeFi) platforms built on top of the Ethereum network. Many holders have shifted their funds from centralized exchanges to DeFi protocols for higher returns.

The returns come from providing liquidity, staking, or other forms of participation in decentralized finance. Also, ETH stakes account for 15% of the coins in circulation per staking reward.

It’s also possible that some holders took a longer-term investment approach by keeping their wealth in personal wallets. It is a means of storing value and avoiding short-term trading risks.

Also, the crypto market experienced a downturn in the second half of 2022. The downturn may have prompted some holders to move their assets from exchanges to personal wallets.

Daily time frame shift and 365 day MVRV

Despite a decent price decline, Ethereum (ETH) has yet to reclaim the price zone it fell into in May. At the time of this writing, it was trading around $1,740 and had suffered losses for two consecutive days. However, ETH had held support levels around $1,732 and $1,630, previous resistance levels.

Source: TradingView

Is your portfolio green? Check out the Ethereum profit calculator

The 365-day Market Value to Realized Value (MVRV) ratio showed that ETH traded below zero for most of the analyzed period.

However, as of this writing, the MVRV had crossed the zero line and is currently at 13.60%. This indicated that ETH holders were now, on average, profitable given the price at which they acquired their coins.

Source: Santiment


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