As the cryptocurrency market continues to experience volatility, the Ethereum network is witnessing a drop in various activities, including withdrawals from cryptocurrency trading platforms.
On December 20, the number of Ethereum exchange withdrawals on a seven-day moving average basis attained a one-year low of 1,176, on-chain data by Glassnode indicates.
Before the latest plunge, the previous low was recorded on December 11, 2021, at 1,179.
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Implications of dropping Ethereum exchange withdrawals
Generally, when most investors withdraw their Ethereum holdings from exchanges, the trend can signal accumulation which translates to a potential bullish momentum in the long term.
On the other hand, it can imply that holders are moving their ETH to exchanges either for withdrawing to fiat or for purchasing altcoins, a situation that can end up being bearish for the asset.
At the same time, amid the ongoing volatility, investors might be expecting the asset to rally in the near future hence opting to hold Ethereum on exchanges. It can also highlight that investors trust exchange crypto wallets despite common hacking incidents.
Furthermore, the withdrawal metric could indicate an altcoin season is on the way. Although it is virtually impossible to determine the exact cause of an altcoin season, it is assumed that after a bull run for assets like Ethereum, investors tend to sell some of their holdings for profits.
Generally, they prefer to invest in altcoins after the sale, driving their prices up. Notably, Ethereum has corrected after a bull run that Bitcoin also experienced. Other driving factors behind a possible imminent altcoin season might be the ongoing NFT craze that largely relies on the Ethereum network.
The drop also correlates with the ongoing Ethereum network upgrade that seeks to introduce the energy-efficient proof-of-stake protocol. Investors are already gearing for the upgrade by depositing ETH 2.0 contracts.
As per our previous report, on December 15, 2021, the total ETH 2.0 deposit contracts attained a new all-time high of 8,662,786 ETH.
Currently, Ethereum continues to feel the impact of the ongoing market volatility. By press time, the second-ranked cryptocurrency was trading at $3,800, dropping almost 3% in the last 24 hours.
