Supply Squeeze Underway for Ethereum

After the successful London Hard Fork, which has seen over 93,000 Ethereum burned out of existence, there is even more good news for Ethereum; supply is leaving exchanges at a rapid rate. According to data from cryptoquant, the amount of Eth held in crypto exchanges has plummeted in the past twelve months.

Reserves dropped from 26 million Eth to 19 million year over year, indicating that the hodler’s have increased and the desire to hodl Eth is ramping up in anticipation of the long awaited Eth 2.0. The price jump year over year indicates the correlation with Eth leaving exchanges in that time-frame, too, with a 730% increase in price, from $407 to $3190. The below data from cryptoquant displays the inverse relationship between prices and exchange reserves.

The supply one exchanges has basically been in a free-fall since Sept 2020. Even during the bear market we saw beginning after the Elon fud this year, the amount on exchanges barely spiked, even though the price took a major hit. This indicates short-term sell pressure, rather than long-term. Supply on exchange rates are a good indicator for long-term time horizons. During the sell-off in May, supply on exchanges only increased by <1 million, which is just a blip on the chart compared to the overall trend of decreasing.

More data from Messari that tracks the total number of Eth deposits to exchanges. This data basically indicates “holding sentiment” for Eth. This data shows that the Eth deposits across numerous trading platforms plummeted by 21% year over year, from 413,772 Eth to 326,408 Eth.

What is extremely interesting (to keep in mind for future reference) is you can see in the Messari data that massive spike downwards in supply right before Eth pumped massively back up past $3,100. This would suggest that such tracking and spotting these plunges in supply is a good indicator of a near term pump in price. It wicked so low that for a time, only 34,000 Eth was left om exchanges. It is also good because it will never really be a lagging indicator. It seems to only be a lagging indicator in the inverse, when a sell-off occurs, the supply on exchanges begin to increase subsequently (as you can see in the May sell off), which as an indicator, really isn’t useful.

In the last 30 days, Eth deposits to exchanges has been rapidly decreasing, by a total of nearly 48%. This would indicate that investors believe the next leg up for Eth is soon. More bullish news is reflected in the unique Eth address count. The address count, as seen below is significant for two reason. One, as you can see, it has been stagnant since May, even slightly decreasing. Even during the pump in the last month, it was stagnant. But in August, as Eth has been coiling, the address have started to climb again, which indicates we may we primed for lift off. On a year over year timeframe, addresses are up over 30%, another long term bullish development that investors need to keep in mind when dealing with short term fud.

All of that combined leads to many indicators that Eth is going to be going in the right direction in the near term, (not financial advice of course). A supply squeeze is likely underway considering all of these data. Moreover, the 32 Eth staked, the number of Eth staked required to become a validator on the upcoming proof-of-stake upgrade, is going parabolic too. Beacon-chain reports that there is over $22 billion staked.

Demand for Eth continues to grow, with NFT’s going crazy on Eth based platforms like open sea. Eth must be used to transact in these NFT marketplaces, and thus demand for Eth is reflecting in the demand for NFT’s. Lyn Alden, founder of Lyn Alden Investment Strategy called the recent progression for Eth, such as the success of the hard fork “tactically bullish”. Stating that Eth can “easily” head over $5,000 in the near term. The rest of the year should be interesting, and big caps will move too, if not more, despite what many say.

The post Supply Squeeze Underway for Ethereum appeared first on CryptosRus.

Text source: CryptosRus

Cryptocurrency News