$3B Ethereum Exits Crypto Exchanges Post-ETF Approvals

Since the approval of spot Ether (ETH) exchange-traded funds (ETFs) in the United States on May 23, more than $3 billion worth of Ether has been withdrawn from centralized crypto exchanges. This development points towards a potential future shortage of the cryptocurrency. Between May 23 and June 2, around 797,000 Ether—worth approximately $3.02 billion—were moved off exchanges, as indicated by CryptoQuant data.

The reduction in exchange reserves signals that fewer Ether coins are available for immediate sale. This is because investors are transferring their coins to self-custody, likely for long-term holding or other uses. Data from Glassnode, analyzed by Leon Waidmann from BTC-ECHO, shows that the percentage of Ether held on exchanges is at its lowest in years, standing at just 10.6%.

Eric Balchunas, a Bloomberg ETF analyst, recently suggested that the launch of Ether ETFs could happen as soon as late June. Some market watchers predict that the introduction of these ETFs could push Ether to surpass its previous all-time high of $4,870 recorded in November 2021. The expectation is that increased demand could drive up prices, similar to the boost Bitcoin experienced following the launch of its spot ETFs this January.

Unlike Bitcoin, Ether might experience even less downward pressure from inevitable selling, making it potentially more lucrative. Michael Nadeau, a crypto analyst specializing in DeFi, pointed out that Bitcoin miners often have to sell portions of their BTC to cover mining costs. In contrast, Ethereum validators do not face such significant operational expenses, which reduces the need to sell their holdings for cash flow.

Despite the positive outlook, there are some concerns. The Grayscale Ethereum Trust (ETHE), which holds $11 billion in assets, could affect Ether’s market price similarly to how the Grayscale Bitcoin Trust (GBTC) did. The GBTC saw a staggering $6.5 billion in outflows in the month following its approval, raising questions about potential volatility.

Ether’s recent market performance shows the cryptocurrency trading at $3,781, marking a 0.82% decline over the past 24 hours. It also remains down by roughly 23% from its all-time high. These fluctuations have been closely monitored by investors and analysts alike.

The trend of moving Ether into self-custody and away from exchanges reflects a broader strategy among investors who are likely preparing for the long-term gains expected from the upcoming ETF launches. This has led to speculation about a potential ‘supply squeeze,’ where reduced availability on exchanges could drive prices higher.

The forthcoming launch of Ether ETFs could be a significant milestone for the cryptocurrency market. With various factors at play, including reduced supply on exchanges, and the unique economic pressures facing Bitcoin versus Ether, the coming months promise to be interesting for both investors and market watchers.