Ethereum (ETH), the world’s second-largest cryptocurrency by market capitalization, continues to undergo a supply reduction as the latest Shanghai upgrade progresses. Notably, the digital asset’s total supply had dropped by over 66,000 ETH since the start of 2023, making it deflationary.
Currently, there is just 10.31% of existing ETH on exchanges, which is the lowest level since July 2015, as per the latest data from on-chain analytics provider Santiment shared on March 28. Almost 90% of Ethereum is now off exchanges as regulators continue to struggle to classify ETH as a security or commodity.
Indeed, Ethereum’s percentage of supply has now hit its lowest level since its genesis, with the amount of ETH now being held in self-custody and away from exchanges at the highest level since the week the token was introduced nearly 8 years ago.
“This essential all-time low ratio of ETH on exchanges (10.31%) indicates confidence from hodlers.”
ETH self-custody rises amid market uncertainty
The rise in self-custody of Ethereum is due to a growing trend among investors to hold their tokens in personal wallets instead of leaving them on crypto exchanges. This shift in behavior has been fueled by increasing concerns about the security of exchanges such as FTX and the need for investors to have full control over their assets.
The trend is also being driven by the rise of decentralized finance (DeFi) protocols built on the Ethereum blockchain. DeFi protocols enable users to lend, borrow, and trade cryptocurrencies without the need for intermediaries such as banks. This has led to a surge in demand for Ethereum as investors seek to participate in these innovative new financial instruments.
Thus, many investors are starting to look at Ethereum as a potential long-term investment vehicle, much like Bitcoin. This is evident in the growing confidence of hodlers, who are holding onto their Ether for the long term, as opposed to trading it on cryptocurrency exchanges.
Besides the increase in self-custody, the low proportion of ETH on exchanges indicates a significant buying trend. The continued accumulation of Ethereum by hodlers results in a shrinking supply on exchanges, which in turn causes the price of the cryptocurrency to increase.
This pattern is likely to persist as long as investors continue to store their tokens in self-custody; at the same time, Ethereum will likely keep evolving and developing new use cases. As things stand, ETH is now trading at $1,728, down 1.71% in the last 24 hours, with a total market cap of $211 billion.
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