The introduction of crypto-related spot exchange-traded funds (ETFs) in the United States has caused Bitcoin and Ethereum supplies on centralized exchanges to plummet to record lows. Glassnode data indicates that Bitcoin balances on exchanges have dropped to 11.6%, the lowest since December 2017, while Ethereum balances are even lower at 10.6%, the lowest since October 2015.
Market experts attribute the declining exchange balances to the Securities and Exchange Commission’s (SEC) approval of ETF products for Bitcoin and 19-b filings for Ethereum. HeyApollo data reveals that spot Bitcoin ETFs have accumulated 857,700 BTC, valued at $58.5 billion, in just five months. Notably, BlackRock’s IBIT ETF has acquired around $20 billion in assets, followed by Fidelity’s FBTC with approximately $11 billion.
Although spot Ethereum ETFs are not yet trading, investor anticipation has led to significant withdrawals from exchanges. CryptoQuant data shows that 777,000 ETH, worth about $3 billion, have been pulled from exchanges post-SEC approval. Moreover, the option to stake ETH has further influenced its declining exchange balance, with 32.8 million ETH, or 27% of its total supply, currently staked to support the network.
The ongoing trend of declining exchange balances has sparked discussions among market experts about a potential supply crunch for Bitcoin and Ethereum. Leon Waidmaan, the BTC Echo editor, recently warned investors to prepare for a “supply squeeze” and the likelihood of “the next big move.” When digital assets are withdrawn from exchanges, it typically indicates investors’ intention to hold rather than sell, signaling bullish sentiment and expectations of future growth.
If the current accumulation trends continue, a supply crunch could have a significant impact on prices by limiting the available supply. This scarcity may potentially lead to substantial price increases for Bitcoin and Ethereum as demand surpasses supply in the market. Investors should closely monitor exchange balances and ETF activities to gauge the potential market repercussions of these recent developments.
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