On-chain data shows the Ethereum Exchange Supply Ratio remaining flat near its 2016 low, a sign that may be bullish for ETH.
Ethereum’s supply ratio has hit rock bottom lately
In a CryptoQuant Quicktake afteran analyst spoke about the recent trend in the Ethereum Exchange Supply Ratio. The “Exchange supply ratio” is an on-chain metric that tracks the ratio of ETH’s Exchange Reserve to the total supply in circulation.
The “Exchange reserve” here refers to a measure of the total amount of cryptocurrency currently held in the wallets connected to centralized exchanges.
When the value of this indicator rises, it means that investors are depositing their coins on exchanges. Since one of the main reasons why holders would switch to these platforms is for sales-related purposes, these types of trends can have a bearish effect on the price of the asset.
On the other hand, the measure that records a decline suggests that a net amount of supply is leaving the exchanges. Generally, investors put their coins in self-custody wallets when they plan to hold them for the long term, so such a trend could prove to be bullish for ETH.
Here is the chart shared by the quant showing the trend in the Ethereum Exchange Supply Ratio over the past ten years:
The value of the metric appears to have been stale in recent months | Source: CryptoQuant
As shown in the chart above, the Ethereum Exchange Supply Ratio peaked in 2020. During this peak, exchanges held more than 30% of the entire circulating supply of the asset.
However, since then the indicator has fallen continuously, despite the fact that the supply of the asset has increased. This means that investors have withdrawn coins at a rate greater than the expansion of supply.
This year, the measure has fallen to a sideways move, indicating that an equilibrium has been reached in the sector. Interestingly, this flat action is despite the price increase which Ethereum has enjoyed.
The trend would obviously imply that not many cryptocurrency investors are ready to part ways just yet. At the same time, however, there is also no consistent accumulation like before, so it is not that there are no sellers at all.
Nevertheless, the fact that the indicator has at least remained balanced during this rally could be a positive sign for its sustainability. The benchmark now could be something to keep an eye on going forward, just to make sure the trend continues.
Any reversal to the upside would obviously be a signal that investors have started selling, which could mean that the bull run in Ethereum could be nearing its peak.
BTC price
At the time of writing, Ethereum is trading around $3,600, up more than 9% in the past week.
Looks like the price of the coin has been moving up over the last few days | Source: ETHUSDT on TradingView
Featured image from Dall-E, CryptoQuant.com, chart from TradingView.com