The order book supply of Ethereum on cryptocurrency exchanges has hit a 28-month low as demand for the market’s second-in-line soars. This is generally regarded as a good indicator of how strong the selling pressure for a token is. In this case it seems fairly low.
According to data from cryptocurrency analyst Santiment, the ratio of Ethereum (ETH) supply on exchanges to the cryptocurrency’s total supply is at a 28-month low. Specifically, the percentage of ETH on exchanges dipped below 20%. This is the lowest it has been since the analyst began recording the data.
Supply Shrinks, Demand Soars
Just over a year ago, the percentage hit a record high of 27%. However, supply saw a steady decline as the wider cryptocurrency market began growing in value, prompting a surge in demand for ETH.
👍 #Ethereum's ratio of token supply on exchanges (20.1%) is now sitting at a 28-month low. We generally look for relative drops in exchange supply compared to previous months as an indication of safety from major isolated selloffs for #crypto assets. https://t.co/SowKiMpSac pic.twitter.com/GMxFX7kAg1
— Santiment (@santimentfeed) March 21, 2021
At the time of the record high ETH supply, the price of ETH was just over $110. At press time, ETH is trading at around $1'800. Moreover, it broke the key $2'000 level to reach an all-time high of $2'042.93 just weeks ago.
Institutional Hoarding
The trend regarding the availability of Ethereum on cryptocurrency exchanges may be the result of the increased institutional interest the space is presently seeing. For example, Grayscale Investments operates an Ethereum investment vehicle called the Grayscale Ethereum Trust (GETH). This is attracting investment from larger institutions.
03/19/21 UPDATE: Net Assets Under Management, Holdings per Share, and Market Price per Share for our Investment Products.
Total AUM: $45.0 billion$BTC $BCH $ETH $ETC $ZEN $LTC $XLM $ZEC $BAT $LINK $MANA $FIL $LPT pic.twitter.com/7zeSVcAuwJ
— Grayscale (@Grayscale) March 19, 2021
The Trust has just under $5.7 billion worth of ETH under management, representing nearly 2% of the total ETH supply in the market. Moreover, GETH is the second most popular Trust operated by the investment company. The company flagship, the Grayscale Bitcoin Trust, takes first place. Its popularity regularly leads to Grayscale purchasing millions of dollars worth of the top-cryptocurrency.
A Market-Wide Phenomenon
As the top two cryptocurrencies continue to attract large institutions to the cryptocurrency market, other cryptocurrencies are also capturing part of the attention. On-chain data suggests that Chainlink (LINK) was also seeing a supply shortage on top cryptocurrency exchanges. In fact, that shortage also came after Grayscale announced plans to launch a LINK-based trust.
It might be reasonable, therefore, that the market is expecting LINK to follow the same path as Ethereum with regard to institutional investment. Furthermore, the same investigation found that the supply of Bitcoin (BTC) on top exchanges was also in decline. This comes as earlier reports suggested BTC miners were hoarding instead of releasing their reward.
If these supply shortages continue, and demand continues to grow, the market is likely setting up for a move to the upside.
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