Ethereum has been witnessing significant withdrawals from exchanges recently, and new data suggests an increasing scarcity in the circulating supply of ETH, which has reignited discussions in the crypto market. According to Glassnode and CryptoQuant, only 8.84% of ETH is held on exchanges, compared to Bitcoin’s 14.8%. This means that the supply of ETH on exchanges has reached almost half of that of BTC.
Staking and DeFi: A New Home for Ethereum
Leon Waidmann, Head of Research at Onchain Foundation, identifies staking as the primary reason for the reduction in ETH on exchanges. Millions of ETH are locked in staking contracts on the Ethereum network. DeFi applications further compound this effect as users prefer to engage in liquidity pools and collateral mechanisms rather than holding their ETH on exchanges.
Lucca Rassele from MPM Labs highlights that ETH/BTC comparisons can be misleading since these assets serve fundamentally different functions. However, Derek Little, CEO of Innovative App World, attributes ETH’s withdrawal from exchanges directly to its usage: “The era of hype is over; the main topic in crypto is interoperability.”
Furthermore, Glassnode data supports this view. November statistics indicate that ETH investors are more active, selling, and spending compared to BTC investors. The Ethereum network’s operation of numerous applications demands ETH as a gas fee, contributing to its active consumption.
In contrast, Bitcoin investors treat it more like “digital gold”; over 61% of BTC supply has remained stationary for more than a year, affirming this approach.
Growing Institutional Demand: A New Dynamic for ETH
Another crucial reason for ETH’s departure from exchanges is the rising institutional demand. Approximately 25% of ETH’s supply is locked in ETFs and local staking structures, reinforcing its role both as a utility and a store of value. On the DeFi side, a similar scenario unfolds as 16% of Ethereum supply is actively used in liquid staking protocols and collateral structures. Glassnode emphasizes ETH’s rare dual function as a reserve asset and a cornerstone of DeFi.
ETFs and institutional investment products are accelerating ETH withdrawals. ETFs currently hold 5.24% of ETH supply, while DATs hold 4.9%. Throughout the year, the increasing appetite from these entities has notably reduced the balance of ETH on exchanges.
Supporting this trend, CoinShares recently reported an inflow of over $170 million into institutional investment products, with a significant portion involving Ethereum. Analysts suggest that this wave will play a crucial role in determining future ETH price movements.