Ethereum’s supply rate on the exchanges reached its lowest level since November 2018.
The offer rate fell from 26.33% to 22.06% in just 5 months.
This could be partly or entirely due to the increased interest in ether as an investment, the participation in the ETH 2.0 deposit agreement and the strong increase in the use of decentralised finance.
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With the recent rise in prices pushing Bitcoin beyond its historical peak, while the ether was about to pass resistance, we see another bullish parameter for the world’s second largest cryptomony in terms of market capitalization.
The supply rate of Ethereum, which measures the amount of ether Ethereum Code available on cryptomoney exchanges, continues to fall sharply. It has now reached levels not seen since November 2018. Santiment, a blockchain data analysis company, published a tweet on the subject.
„The rate of Ethereum tokens on the exchange continues to decline and is shifting to offline cardholder portfolios. With only 22.06% of tokens on the exchange compared to 26.33% five months ago, this continues to be one of the most promising signs for ETH enthusiasts“.
👛 The ratio of #Ethereum tokens sitting on exchanges continues to decrease & move to offline holder wallets. At just 22.06% of tokens on exchanges compared to 26.33% five months ago, this continues to be one of the most promising signs for $ETH bulls. https://t.co/I7208xh9Xa pic.twitter.com/ikKLRJVNrL
– Santiment (@santimentfeed) January 17, 2021
The ether continues to leave the exchange platforms
The data presented suggest that Ethereum will continue to move away from exchanges. It will most likely end up in portfolios where it will be held or spent in the form of gas for DeFi (decentralised finance) or other dApps (decentralised applications). Users could transfer ETH into cold storage portfolios as a long-term investment. Alternatively, they could also use it to run a range of other applications based on smart contracts.
Decentralised finance attracts more users to ETH
DeFi applications flourished in the year 2020. The TVL (total blocked value) has risen from around $600 million to nearly $25 billion. This consequently increases the demand for ether, which acts as the „gas“ of the Ethereum ecosystem. Thus, the record growth in the use of ether reflects the fact that Ethereum has reached annual records in terms of transaction costs generated. In 2020, it surpassed Bitcoin by 83%. This increase in DeFi usage meant that users needed more ETH to be able to carry out their transactions.
Ethereum 2.0 and staking create demand
Beyond the growth of the challenge and the use of ether in general, the introduction of Ethereum 2.0 has created a new mechanism for ETH users to generate additional returns. The launch of Ethereum 2.0 initiated the transition of the network from a method of verification of proof of work (PoW) to proof of issue (PoS).
Proof of Stake allows users with a minimum of 32 ETHs to place them in staking, or to deposit them on the network. If they do so, they can then check Ethereum’s transactions and be rewarded. A staking contract has thus been introduced, allowing users to deposit and „lock“ their Ethereum, the current address of the ETH 2.0 deposit contract being located at more than 2.5 million ETH.
It is impossible to say with certainty where ETH is heading with regard to the exchange platforms, but it is highly likely that these three ETH user points are the main candidates. As the demand for Ethereum continues to grow and more and more ETHs find themselves staking in the ETH 2.0 contract (making it inaccessible for 1-2 years or more until the next stage of ETH 2.0 is made public), more ether will leave the exchanges and reduce the available liquidity.