Recent data reveals that the supply of Bitcoin (BTC) and Ethereum (ETH) on exchanges has decreased significantly. This drop indicates that the top cryptocurrencies by market cap are potentially gearing up for substantial price movements to the upside, as a supply squeeze looms. According to BTC ECHO analyst Leon Waidmann, Glassnode data shows that 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 sits at 10.6%. This suggests that large crypto holders, known as whales, have been accumulating these tokens and transferring them to self-custody.
The Significance of a Supply Squeeze
Waidmann emphasizes the importance of this trend, indicating that a supply squeeze is on the horizon. This squeeze could potentially drive up the prices of Bitcoin and Ethereum, as it appears that most investors are currently in accumulation mode rather than selling their holdings. In light of this data, the analyst advises his audience to prepare for what could be a significant price movement in the near future.
Crypto analyst Ali Martinez suggests that this trend may have been triggered by the recent approval of Spot Ethereum ETFs. Martinez noted in a social media post that nearly 777,000 ETH (equivalent to $3 billion) have been withdrawn from cryptocurrency exchanges following the Securities and Exchange Commission’s green light on these funds. The anticipated launch of these Spot Ethereum ETFs is expected to catalyze a bullish market momentum. Therefore, it comes as no surprise that crypto whales are strategically positioning themselves ahead of this impending development. Bloomberg analyst Eric Balchunas forecasts that these funds will likely commence trading by July.
Despite the optimistic outlook, research firm Kaiko has cautioned that the introduction of Spot Ethereum ETFs may not immediately propel Ethereum to new all-time highs. The second-largest cryptocurrency could face significant selling pressure due to potential outflows from Grayscale’s Spot Ethereum ETF. Drawing parallels from the $6.5 billion outflows observed with Grayscale’s Spot Bitcoin ETF during its initial trading month, a similar decline in Ethereum’s price could be on the horizon.
Comparing Ethereum to Bitcoin
Crypto analyst Michael Nadeau offers insights into Ethereum’s unique position, stating that Ethereum could potentially reach new all-time highs faster than Bitcoin did following the introduction of Spot Bitcoin ETFs. Nadeau points out that Ethereum lacks the same structural selling pressure that Bitcoin encounters, as ETH validators are not required to sell their holdings to cover operational costs, unlike Bitcoin miners. Additionally, Nadeau highlights that 38% of Ethereum’s supply is locked on-chain, emphasizing that “ETH is more reflexive than BTC.” He further elaborates on this reflexivity by pointing out how Ethereum leads in on-chain activities, resulting in more ETH being burned.
