Ethereum Supply on Exchanges at 5-Year Low: Capital Fleeing Crypto

• ETH has had a volatile few years, with its price bouncing around $100-$200 and then suddenly shooting up to nearly $5,000 before crashing back down.
• Only 15% of ETH is now on exchanges, the lowest in 5 years. This liquidity shortage is due to capital fleeing crypto markets at large, as well as Ethereum’s staking contract opened up in late 2020.
• Volatility has risen as a result of this low liquidity, and aggressive moves to the downside are possible despite bullish first quarter for market as a whole.

ETH on Exchanges At 5-Year Low

Crypto Capital Flowing Out Of Exchanges

The cryptocurrency market has seen capital flow out of exchanges over the last four months, with 45% of stablecoin balance exiting the space. Similarly, Bitcoin currently has only 11.8% of its supply on exchanges – its lowest level since the bull market peak five years ago. Ethereum follows this same pattern; 18.1 million ETH is now present on exchanges – representing just 15% of the total supply – making it the lowest amount in five years.

Ethereum Staking Contract Linked To Liquidity Shortage

Ethereum’s own staking contract could be linked to this decrease in liquidity; opened up in November 2020, users were able to lock up their ETH tokens ahead of Merge – Ethereum’s transition to a proof-of-stake network – which went live last September. Those stakers got access to their tokens just last week after Shanghai upgrade went live and plotting these two points together makes it clear that staking is likely playing a role in this low liquidity situation.

Volatility At High Levels As A Result Of Low Liquidity

This lack of liquidity means that volatility has increased significantly; when there are fewer coins available on exchange for traders and investors there is less room for manoeuvre when manipulating prices or trading against other pairs, meaning any movements have more impact than usual – both upwards and downwards – creating an environment with more extreme swings than normal.

Bullish First Quarter Despite Potential Aggressive Downside Moves

Despite this potential for aggressive swings downwards, crypto markets have been largely bullish during Q1 2021; Bitcoin started off 2021 at $29k before reaching new all time highs above $64k in April while Ethereum also hit new all time highs above $3000 during March 2021 before dropping back down again shortly after.

Conclusion: Low Liquidity Potentially Creating Unstable Environment For Traders

In conclusion, Ethereum’s current situation shows us how quickly capital can flee from crypto markets; only 15% of ETH is now on exchanges due to both general capital flight from cryptocurrencies and Ethereum’s own staking contract opened up late 2020 . With such little liquidity present traders should be wary of potential instability caused by aggressive moves both upwards and downwards in price action , despite overall bullish sentiment within crypto markets during Q1 2021 .