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The price of Ethereum showed a significant level of volatility over the past week, oscillating between about $4,260 and $4,490. This price movement is not merely a result of market volatility but also a host of intriguing underlying factors. Recent on-chain analysis delves into some factors behind Ethereum’s price action.
Ethereum Holdings Across Exchanges Drop In 3 Months
In a Quicktake post on the CryptoQuant platform, pseudonymous analyst CryptoOnchain revealed that the Ethereum holdings across different centralized exchanges have witnessed a significant drop over the past few months.
Most notably, Binance and Coinbase, two of the world’s largest exchanges by trading volume, are the major culprits behind this persistent ETH outflow trend.
According to the analyst, Binance’s holdings have dropped by about 700,000 ETH in less than two weeks (from August 23 to September 5). Within this same period, US-based Coinbase also recorded a token outflow of approximately 900,000 ETH.
Going higher on the timeframe, CryptoOnchain cited the outflow of ETH over the span of roughly two months to be over 2.6 million Ether tokens across centralized exchanges. Interestingly, the analyst noted an apparent inverse correlation between ETH exchange holdings and the market price of Ethereum.
Implications For Ethereum Price
The general increase in outflows from exchanges, specifically Coinbase and Binance, suggests an ongoing accumulation of Ethereum tokens. Typically, exchange outflows indicate that investors are moving their assets from exchange addresses to non-custodial wallets.
Source: CryptoQuant
Essentially, this trend signals that investors are no longer looking to sell their Ethereum tokens but rather hold them in the long term. The earlier-mentioned inverse correlation between Ethereum exchange holdings and ETH price supports this conjecture.
When there is a significant withdrawal of digital assets from exchange addresses to holder wallets, a phenomenon known as a supply shock may ensue. For context, a supply shock or supply crunch refers to a drop in the amount of an asset available in the open market, leading to a jump in prices.
Related Reading: Stablecoin Exchange Liquidity Hits Record $68 Billion, Binance Alone Holds 67%
In light of this, CryptoOnchain reiterated this basic economic principle, stating that this sustained decrease in ETH supply on exchanges could lead to a rise in price, especially if investor demand remains or increases.
As of this writing, the Ethereum price stands at around $4,276, reflecting an almost 1% decline in the past 24 hours. According to CoinGecko data, the second-largest cryptocurrency is down by more than 2% in the last seven days.
The price of ETH on the daily timeframe | Source: ETHUSDT chart on TradingView
Featured image from iStock, chart from TradingView
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