Traders are pulling Ether from a centralized exchange and locking it to DeFi smart contracts. This suggests that traders believe that the market may rise further.
According to Glassnode data, the number of ETHs stored on the exchange is the lowest since August 2018, with 20.6M Ethereum (17.1% of Ethereum’s supply) locked on the central exchange.
However, Ether’s supply fell in 2018, with 20.6M Ether held on centralized exchanges accounting for 20% of coin circulation. On a percentage basis, Ethereum’s decentralized exchange balances are at their lowest level since July 2016, when ETH traded for only $ 10.
Bullish sentiment
A significant decrease in forex balances means that investors are prepared to hold cryptocurrencies for long periods of time, either refrigerating them for secure storage or putting them in DeFi smart contracts to earn yields. Suggests.
In July last year, on-chain analyst Willy Wu said the market is likely to rise when the “supply shock” of centralized exchanges coincides with stable prices. When the exchange balance plummeted in both May 2020 and July 2021, the price of Ethereum rose sharply shortly thereafter.
Ethereum is not the only coin that traders are taking off from centralized exchanges. April 13, Crypto Analyst Wilcrement Release A chart showing that traders have withdrawn Bitcoin from centralized platforms with amazing clips over the past few weeks.
“I’ve only seen Bitcoin withdraw from the exchange at this rate three other times,” he tweeted. It was May and December 2020. Both events preceded the period of price increases.
Glassnode data also shows that BTC balance on centralized exchanges is at its lowest level since 2018.
However, the balances of both Ethereum and Bitcoin decentralized exchanges have been steadily declining since mid-2020, with only temporary Bitcoin balances in mid-2021 before the price plunge in November. It has risen.
While the ETH balance on centralized exchanges has plummeted, the number of Ethereum betting on the DeFi protocol has increased.
The total amount of ETH deposited in smart contracts is approaching the highest ever, with 27.5% of the supply, or 33.1M Ethereum, locked to the DeFi protocol. The 28.1% record was posted in late October 2021 just weeks before the end of the recent record-breaking bull market. Between November 2021 and January 2022, ETH prices fell 56% from approximately $ 4,900 to $ 2,150.
The share of Ethereum’s supply fixed to smart contracts reached a record high during the 2020 DeFi Summer, accompanied by a significant price increase in ETH.
More than half of Ethereum’s supply hasn’t moved for more than 12 months, according to Glassnode’s Hodl Waves chart, which measures when coins were last moved on the chain.
Approximately 30% of ETH’s supply has moved between wallets over the last six months, but HodlWaves data suggests that most ETH investors hold coins for a long time.
According to Staking Rewards, about 9.1% of Ethereum’s supply is also locked to stake on the Eth2 Beacon chain. A record number of validators are also waiting to come online.
The situation was very different when traders withdrew ETH from the exchange in bulk. At that time, traders were celebrating the DeFi summer of 2020. Today, DeFi traders are more cautious and greasy, and the protocols are very different. Unresolved question: Where do ETH holders park their assets this time?
