Key Takeaways:
- Smart contract platform Ethereum’s native token Ether (ETH) is only 11.89% present on exchanges.
- The outflow, combined with the supply squeeze make a bullish case for Ethereum.
- ETH daily chart struggles between conflicting setups, as it jumps 6%.
YEREVAN(CoinChapter.com) – Alex Moskovski, the founder and CEO of the fintech marketing company SaaS, tweeted a graph from the analytical platform Glassnode, containing Ethereum exchange balance statistics. The chart presented below demonstrates a new low for ETH presence on exchanges.
Generally, outflow from exchanges indicates that traders are more willing to hold their crypto than trade it for other digital or fiat currencies. According to the chart, the Ethereum exchange presence and the price are inversely correlated. As asset value climbs higher, the exchange presence declines, creating an outflow.
Also read: Ethereum’s bull flag setup fights two dreaded selloff indicators as ETH rises back above $4.4K.
Meanwhile, Ether climbed another 6% in the previous two sessions before halting at $4,325 in Tuesday’s New York session. The alpha altcoin flashed conflicting setups on the daily chart: a bearish selloff indicator dubbed the Descending Triangle and a Bull Flag.
Both formations share a descending resistance trendline. However, The Bull Flag features parallel descending support, while the Triangle’s support is horizontal (dashed line on the chart below).
The upcoming two weeks could bring ETH more consolidation before it takes off with a distinctive vector. However, the exchange outflow could mean a strong holding incentive among Ethereum bulls and a subsequent price boost.
Bullish factors for Ethereum
In detail, Ethereum’s full transition to ETH 2.0 is due Q1 2022. The company claims that the overdue shift will take the platform from proof-of-work (PoW) consensus mechanism to proof-of-stake (PoS). Said transition could preserve energy and increase transaction speed, making Ethereum more attractive for users.
Moreover, the network launched its Ethereum improvement Protocol EIP-1559 in August and put a token burn mechanism in place. The blockchain burns some Ether tokens at a 5.88 ETH/min average rate with every new transaction. As of publication, over a million ETH has been burnt, worth almost $5 billion.
Thus, EIP-1559 implementation created a supply squeeze for ETH, which could boost the price based on the asset scarcity.
Also read: Ethereum user pays more in gas fees than the transaction value itself.
According to crypto exchange Kraken’s November report, Ethereum saw a 92.9% supply inflation reduction in the said month. Furthermore, the report indicated that “long-term holders appear confident” in the asset. The Kraken team based the assertion on ETH’s exchange net position change downtrend presented below.
Ethereum saw a whopping 92.9% net reduction in supply inflation over the last 30 days, thanks to relatively live demand for DeFi, ETH transfers and stablecoins. […] The amount of ETH on exchanges is falling. In what seems to be a spike in Ethereum interest, the supply sitting on all exchanges has dropped by more than $35 billion since Aug 2020.
read the report.
Also read: Ethereum realized market cap hits all-time high amid ETH rebound from $4K-support
The confluence of bullish factors, such as the ETH outflow from exchanges and the growing supply squeeze, makes a case for a possible uptrend in the coming weeks. However, conflicting technicals don’t indicate a distinctive bias in the short term.
