ETH Exchange Supply at 5-Year Low as Capital Flees Crypto

• Ethereum (ETH) has had a volatile few years, with the amount of ETH on exchanges now at its lowest in 5 years.
• The drop has been swift since staking opened up in late 2020, with 45% of stablecoins and 11.8% of Bitcoin also fleeing exchanges.
• Volatility has risen due to this capital flight, with the recent Shanghai upgrade unlocking ETH staked in anticipation of Ethereum’s transition to proof-of-stake being a major factor in the exodus.

Ethereum Price Volatility

Ethereum has had an eventful few years, bouncing around between $100 and $200 for much of 2018-2020 before thrusting upwards towards the end of 2021 and reaching almost $5,000 before crashing back down below $1,000.

Capital Flight from Crypto Markets

Since then there has been a rapid decline in the supply of ETH on exchanges, with only 15% remaining – the lowest number seen in five years. This trend is mirrored across cryptocurrencies as a whole; 45% of stablecoin balances have exited exchanges over the last four months and Bitcoin now only holds 11.8%, its lowest since the bull market top five years ago.

Effects on Market Liquidity & Volatility

This capital flight from crypto markets means liquidity is thinning out; volatility has risen significantly as a result with aggressive moves to downside possible despite an overall bullish Q1 for most cryptos.

Staking & The Merge

The arrival of Ethereum’s Merge – its transition to proof-of-stake – was made possible by a staking contract which opened up in November 2020 allowing users to lock up their ETH until it eventually went live last September. Stakers were granted access to their tokens last week as part of the Shanghai upgrade and this influx could be a factor driving capital away from exchanges.

Conclusion

With Ethereum’s high price volatility combined with capital flight from crypto markets resulting in low liquidity levels, investors should exercise caution when trading or investing in Ethereum or other cryptos at this time.