Ethereum (ETH) is experiencing a historic shift as its supply on centralized exchanges (CEXes) drops to an unprecedented low of 9.75%.
This dramatic reduction has raised expectations of a potential supply shock, coinciding with a significant decrease in gas fees and a slump in trading volume and transaction activity.
Analysts are closely watching these trends to gauge their impact on ETH’s price and market dynamics.
Ethereum (ETH) CEX holdings hit a historic low
On August 26, 2024, only 9.75% of ETH is held on centralized exchanges, marking the lowest percentage in its history.
This sharp decline reflects a strategic move by holders who are withdrawing their assets from exchanges, likely in anticipation of better future prices.
Leon Waidmann, Head of Research at Onchain Insights, highlights this shift as a crucial development with the potential to influence ETH’s price trajectory significantly.
Historically, high concentrations of cryptocurrency on exchanges often signal a bearish outlook, as holders might be preparing to sell. However, the current scenario suggests a growing confidence among Ethereum (ETH) holders.
The last major outflow occurred in March 2024, when holders withdrew assets during a price peak to capitalize on high market values.
The present trend of withdrawing ETH from exchanges further indicates a reluctance to sell at current prices, suggesting optimism about future gains.
ETH gas fee drop and trading activity declines
Adding another layer to Ethereum’s evolving market landscape, the average gas fee has plummeted by 85% over the past year, reaching an average of 2.6 Gwei in August 2024.
At press time, the gas fee was 1.6 Gwei.
This substantial decrease in transaction costs, from above 16 Gwei last year, reflects enhanced network efficiency and a reduction in on-chain activity.
Despite this, Ethereum’s daily trading volume has dropped significantly, falling by 55% over the past month.
The seven-day moving average of daily transactions has hit a multi-month low of 1.07 million, signalling reduced economic activity on the network.
August 2024 has also seen a considerable decline in Ethereum’s trading volume, with the monthly figure currently at $91.46 billion, down from $134.71 billion in July.
This decrease is in line with the typical summer lull observed in previous years, though the current decline is less severe compared to past years.
Additionally, reduced institutional interest is evident, as indicated by the underperformance of Ethereum spot exchange-traded funds relative to bitcoin products.
As Ethereum navigates these complex trends, marked by historic lows in CEX supply, dramatically lower gas fees, and declining trading volumes, investors and analysts are closely monitoring the network’s evolving dynamics for potential impacts on its market value and future performance.
At press time, Ethereum (ETH) was trading at $2,723.76, up 5.18% despite being down 16.09% over the past month.
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