Ethereum balance on crypto exchanges hits new lows as ETH price recovers $ 3,000

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The total amount of Ether (ETH) held by all crypto exchanges fell to its lowest levels, just as its prices climbed back above $ 3,000 per token on September 23.

Data collected by CryptoQuant, a blockchain analytics platform, showed that the exchanges’ net Ethereum token reserves fell to 18.533 million ETH, from 23.92 million ETH a year ago. Meanwhile, the cost of buying an Ether has dropped from nearly $ 349 to $ 3,078, showing an inverse correlation between ETH reserves on trade and prices.

Ethereum all foreign exchange reserves against ETH / USD price performance. Source: CryptoQuant

Supply-demand factor

Lower foreign exchange reserves indicate that traders are likely to hold the underlying cryptocurrency rather than trading it for other digital / fiat assets. Therefore, if the demand for the token tends to increase, the lack of adequate supply contributes to increase the prices.

So it looks like Ethereum’s native token has started to adjust to the classic low-supply, high-demand bullish pattern. For example, Dapp Radar reported that the Total Locked-In Value (TVL) in the decentralized applications industry reached $ 142 billion, of which 68% was focused on the Ethereum network in August 2021.

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On the other hand, more Ether tokens began to run out of active supply after Ethereum announced its staking feature in November 2020, as the network prepared to become a standalone proof-of-stake blockchain. whole by 2022.

In detail, the TVL inside Ethereum 2.0 smart contracts has gone from 11,616 ETH in November 2020 to 7.75 million ETH today.

Total value at stake in Ethereum 2.0 smart contracts. Source: TradingView.com

Additionally, a major network upgrade on August 5, 2021, dubbed the London Hard Fork, added functionality that reduced the rate of growth in the ether supply. The change, called EIP-1559, began to split into three parts nearly 13,000 new ETHs issued every day for minors’ payment fees.

The network has started to burn down one of those divisions: the basic fee that users pay miners to process transactions. As a result, more ETH tokens have run out. Data tracking portal WatchTheBurn.com noted that the EIP-1559 feature has helped burn 352,262 ETH to date, which is roughly $ 1.1 billion compared to current exchange rates.

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Lark Davis, an independent cryptocurrency market analyst, said the current supply and demand dynamics in the Ethereum market will help push ETH prices towards $ 10,000.

The macro effect

Cryptocurrency markets have functioned this week in response to a looming housing crisis in China’s real estate sector and its ripple effect on global economies.

In detail, the ETH / USD exchange rate fell 20.78% in the first two days of this week, falling to $ 2,651 as investors limited their exposure to riskier markets and sought out safe havens. more secure like the US dollar and treasury bills. Fears of contagion from the debt crisis of the China Evergrande group, which owes billions of dollars in bonds to global investors, sparked the sale.

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ETH / USD daily price chart correlated to BTC / USD and S&P 500. Source: TradingView.com

Ether rebounded to 18.82% after hitting a local low at $ 2,651, including a 2.33% increase to $ 3,150 on Thursday. Nonetheless, the cryptocurrency’s 50-day exponential moving average (50-day EMA) near $ 3,191 and the 20-day EMA near $ 3,291 have acted as strong resistance targets.

Related: Ethereum Forming a Double Top? ETH price loses 12.5% ​​amid Evergrande contagion fears

The Santiment blockchain data tracking service noted that the Ethereum token could continue to rebound until its short-term holders are profitable. The portal cited the Market Value to Realized Value (MVRV) ratio – calculated over a seven-day average – behind its bullish analogy.

ETH / USD MVRV 7D. Source: Sanbase

Extract from the Santiment report on Wednesday:

“In the near term, MVRV 7D suggests a rebound, but the real rally is unlikely until we get closer to the next major speculative event – the transition to Proof-of-Stake (PoS) in 2022.”

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of TBEN.com. Every investment and trading move comes with risk, you should do your own research before making a decision.