The latest data reveals a significant drop in the supply of Bitcoin (BTC) and Ethereum (ETH) on exchanges. This reduction indicates that the top crypto tokens in terms of market capitalization could be on the verge of experiencing substantial upward movements, with a supply squeeze looming. Analyst Leon Waidmann from BTC ECHO shared Glassnode data showing that exchange balances for Bitcoin and Ethereum have reached their lowest levels in several years. Bitcoin’s supply on exchanges has decreased to 11.6%, while Ethereum’s supply has fallen to 10.6%. This trend suggests that major crypto holders have been accumulating these tokens and transferring them to self-custody, away from exchanges.
Notably, crypto analyst Ali Martinez proposed that this shift in supply might be linked to the approval of the Spot Ethereum ETFs. Martinez mentioned in a post on X that nearly 777,000 ETH (equivalent to $3 billion) have been withdrawn from crypto exchanges since the Securities and Exchange Commission (SEC) gave the green light to these investment vehicles. The impending launch of these Spot Ethereum ETFs is anticipated to propel the bull market into full swing. Thus, it comes as no surprise that crypto whales are positioning themselves strategically before this event. Bloomberg analyst Eric Balchunas has projected that these funds could begin trading as early as July.
Despite the optimistic outlook, research company Kaiko has cautioned that the approval of Spot Ethereum ETFs may not instantaneously push Ethereum’s price to new all-time highs (ATHs). The runner-up crypto asset is likely to encounter substantial selling pressure due to possible outflows linked to Grayscale’s Spot Ethereum ETF. This prediction stems from the massive $6.5 billion outflows recorded by Grayscale’s Spot Bitcoin ETF during its initial month of trading, which resulted in a considerable drop in Bitcoin’s price.
On a positive note, crypto analyst Michael Nadeau has suggested that Ethereum might still achieve a new ATH once the Spot Ethereum ETFs are launched, potentially at a faster pace than Bitcoin did following the introduction of the Spot Bitcoin ETFs. Nadeau pointed out that Ethereum does not face the same level of “structure selling” as Bitcoin because ETH validators are not required to sell their holdings to cover operational expenses, unlike Bitcoin miners. He also emphasized that 38% of Ethereum’s supply is locked on-chain, indicating that “ETH is more reflexive than BTC.” Nadeau further underscored the reflexivity of Ethereum through its lead in on-chain activity, resulting in a higher amount of ETH being burned.
The dwindling supply of Bitcoin and Ethereum on exchanges, coupled with the forthcoming launch of Spot Ethereum ETFs, could trigger significant price movements for these two leading crypto assets. While Ethereum may face challenges in reaching new ATHs due to potential selling pressure, the unique characteristics of the Ethereum network, such as on-chain supply locking and reflexive nature, may pave the way for a successful rally. Investors should closely monitor these developments and prepare for the potential upsurge in the prices of Bitcoin and Ethereum in the near future.
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