3.28% of Ethereum’s Circulating Supply Has Moved Out of Centralized Exchanges This Year
Yet another driver to cover the lost ground. An increasing number of ETH is being locked up, not available for trading, with some events not even priced in.
This week started on a good note for Ether, along with the broad cryptocurrency market as the prices surged. The price of ETH went as high as $1,880 on Wednesday after falling under $1,300 at the end of February.
Ether is currently recording 148% gains YTD as the crypto asset trades around $1,800. Amidst these gains, 104,000 ETH have been moved off the centralized exchanges, which could be in favor of self custody, to invest in DeFi, for staking in ETH 2.0, or hopes for a higher value in the future.
In 2021, so far, per the Netflows Indicator of IntoTheBlock, a total of 3.7 million ETH has left the exchanges, 3.28% of Ethereum’s circulating supply.
Besides the decreasing supply of Ether on cryptocurrency exchanges, 8.7 million of Ether are locked in decentralized finance (DeFi) protocols. Nearly 3.2 million ETH have also been sent to ETH 2.0 deposit contract for an unknown amount of time, while another 3.17 million ETH are with Grayscale Investments, the world's largest digital asset manager.
Ether actually has the second-highest distributed supply, after Bitcoin, with an SER of 0.041. The Supply Equality Ratio by CoinMetrics is inspired by the 20:20 Ratio, a traditional wealth inequality metric that compares the average income of the richest 20% of society to the poorest 20%.
Not Priced In
Last week, the on-chain usage of the blockchains was relatively flat as things slowed down. ETH daily active addresses dropped by 8.2%, and so did the transaction fees, averaging $15.3 million per day.
The weekend of the same week, the bullish news came in the form of Ethereum Improvement Proposal (EIP) 1559 officially included in the upcoming London hard fork in July, which is expected to create a “positive feedback loop for Ether’s price.”
According to trader Luke Martin, EIP-1559 is not priced in, which he says could help Ether make up the lost ground quickly; Ethereum underperformed Bitcoin by about 30% in February.
The implementation of the proposal will mean a portion of every transaction fee/base fee will be burned, permanently removing those ETH from the circulation. As we reported, a good chunk of Ethereum miners’ revenue, more than 40%, comes from fees which mean the proposal will potentially decrease total miner revenue.
However, it is only expected to be in the short term as the second largest network’s user base is expected to grow as the platform becomes “easier, faster, and cheaper to use.”
Miners also control an increasing amount of ETH, which increased substantially in 2020; however, their holdings as a percentage of total supply have never been very high because the majority of Ethereum was premined.
For Ether miners, things can get further tricky with ETH 2.0, which will mark the transition from Proof of Work to Proof of Stake— a completely new consensus algorithm that would replace miners with stakers.