$3 Billion Worth OF ETH Withdrawals From Exchanges Suggest A Potential Supply Squeeze For Ethereum

After the US approval of spot Ethereum ETFs on May 23, more than $3 billion worth of Ethereum (ETH) has been withdrawn from various crypto exchanges — indicating a potential future supply squeeze.

Data from CryptoQuant shows that between May 23 and June 2, around 797,000 ETH, amounting to $3.02 billion, were transferred off exchanges. 

This significant decrease in exchange reserves indicates that investors are shifting their ETH to self-custody solutions, reflecting a preference for holding rather than immediate selling. A reduction in coins on exchanges typically implies reduced availability for sale, potentially leading to tighter supply conditions. 

Supporting this trend, data from Glassnode reveals that the proportion of circulating Ether held on exchanges has reached its lowest level in years, now standing at just 10.6%.

Although the approval of the spot Ethereum ETFs has generated substantial interest, Bloomberg ETF analyst Eric Balchuas suggests that these ETFs could feasibly launch by late June. Some market analysts also anticipate that introducing spot Ethereum ETFs could drive Ethereum (ETH) to surpass its previous ATH of $4,870.

In a report dated May 28, crypto analyst Michael Nadeau stated that Ether might experience even greater advantages from demand pressures compared to Bitcoin, given its lack of comparable “structural sell pressure,” as per the DeFi report.

However, there are lingering concerns regarding the potential influence of Grayscale’s Ethereum Trust (ETHE), which oversees $11 billion in assets. If it mirrors the behavior of the Grayscale Bitcoin Trust (GBTC), which experienced $6.5 billion in outflows shortly after approval, it could exert a significant impact on ETH’s price dynamics. 

At press time, Ethereum (ETH) is trading at $3,830.17, reflecting an increase of 0.89% over the last 24 hours.