- For the first time in history, more Ethereum (ETH) is staked than held on crypto exchanges.
- This fundamental shift in Ethereum market dynamics could have significant long-term effects on Ethereum’s price movements.
In a groundbreaking development for the Ethereum community, the amount of staked Ethereum (ETH) has for the first time exceeded the quantity of ETH held on cryptocurrency exchanges. This unprecedented event, vividly captured by crypto analytics firm Nansen, has the potential to profoundly reshape Ethereum’s market dynamics.
Recently, Ethereum holdings on crypto exchanges hit an all-time low. The decrease in exchange-held ETH is likely influenced by a combination of factors, including the fallout from FTX, uncertainties surrounding Binance, and the SEC’s anti-crypto initiative in the United States. Investors may have chosen to take direct control of their ETH or invest them into staking services, prompting the shift in ETH distribution.
This pivot has seen staked ETH surpass exchange-held ETH, resulting in a new market scenario. An increasing staking rate, coupled with a declining ETH supply on centralized crypto exchanges, leads to a scarcity in Ethereum’s supply. Assuming demand remains stable or increases, this scarcity can produce upward pressure on Ethereum’s price, painting an increasingly bullish picture for Ethereum based on on-chain data.
Illustrating this historical event, Nansen’s data reveals that currently, approximately 23.81 million ETH, worth around $44.39 billion, is staked, while only about 23.36 million ETH, valued at $43.55 billion, is held on centralized crypto exchanges. Impressively, both figures represent around 20% of the total ETH supply, a stark shift from earlier in the year when over 40% more ETH was on exchanges than in staking.
Furthermore, this trend has resulted in a 20% decrease in exchange-held ETH since the beginning of the year, equivalent to approximately 5.1 million ETH or $9.51 billion. Concurrently, the amount of staked ETH has risen by a third, reflecting an increase of 5.9 million ETH, or nearly $11.1 billion.
In the face of regulatory concerns and uncertainties, investors have been increasingly shifting their ETH holdings from exchanges to staking and private wallets. Moreover, the Shappella upgrade has also contributed to this uptick in staking as it reduced associated risks, thereby boosting investor confidence and staking rates.
A consequence of these shifts is a significant increase in the percentage of ETH located in smart contracts. Now, nearly 31% of all ETH is locked in smart contracts, up from around 26% at the start of 2023. This percentage is a crucial indicator of real ETH scarcity in the context of the declining holdings on centralized crypto exchanges.
As more and more ETH is locked into smart contracts long-term, it suggests that less ETH is available for active trading. Investors are using their ETH in decentralized applications like NFT and DeFi protocols for activities such as yield farming or taking out loans. Thus, the percentage of ETH in smart contracts offers insights into how investors are deploying their ETH, illustrating the true scarcity of Ethereum supply.
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