For the first time in its over a decade-long history, Ethereum has seen its supply held on centralized exchanges fall below 4.9%.
Bitcoin is not far behind, with only 7.1% of its total supply currently on exchanges, marking the lowest level since November 2018. These insights come from the analytics firm Glassnode. Although these figures do not necessarily predict future price trends, they do indicate a shift in market sentiment. Such unprecedented metrics suggest a growing long-term confidence among holders of the two leading cryptocurrencies.
When you factor in the rising influx of capital into the market, improvements in network infrastructure, and a generally positive environment for ETFs, the overall picture for Ethereum and Bitcoin appears stronger than ever, even if the market is somewhat reactive in the short run.
Ethereum’s Realized Cap Surges Post-Pectra
Following the highly anticipated Pectra upgrade, the on-chain valuation of Ethereum has shown a notable increase. The Realized Cap, which reflects the total capital within the Ethereum network, has been on the rise. On May 19, the Realized Cap stood at $244.6 billion, up from $240.8 billion just 12 days earlier on May 7, suggesting that this value has decisively broken a downtrend that persisted since early February.
The Pectra upgrade has enhanced network efficiency, user accessibility, and scalability, fostering renewed investor confidence. Compared to market capitalization, Realized Cap provides a more stable and rational assessment of network value, as it considers coins in circulation while filtering out the short-term price fluctuations that often cause investor anxiety.
This refreshing injection of on-chain capital indicates that Ethereum’s utility and demand have increased since the network upgrade. Coupled with dwindling exchange balances, it becomes increasingly clear that users are opting to store their ETH outside of exchanges. The motivations behind this choice—whether for staking, medium-term investment, or casual interaction with decentralized applications—remain to be fully understood.
Bitcoin and Ethereum Supplies Dwindle on Exchanges
Over the past five years, the quantity of Bitcoins held on centralized exchanges has dramatically decreased. Currently, there are 1.7 million fewer BTC on these platforms, as reported by Glassnode. Although this may not seem substantial—roughly $9 billion worth of BTC still resides on exchanges today—it’s essential to note that the supply has halved from 17.3 billion BTC in April 2020. Similarly, Ethereum is also experiencing a significant reduction in supply on centralized trading platforms.
For active traders, keeping crypto assets on exchanges has been convenient for some time. However, the inherent vulnerabilities of exchanges—such as security breaches, regulatory scrutiny, and centralized control—have prompted many users to transition to private wallets and cold storage. This shift has accelerated since 2019, following notable exchange collapses and a greater move toward more secure, user-friendly non-custodial options.
As more coins are withdrawn from exchanges, the available supply for immediate trading diminishes, potentially tightening liquidity and reducing long-term volatility. This trend may also be interpreted as a bullish indicator for market participants, as it lessens the selling pressure that may have contributed to recent downturns.
This behavior aligns with the growing adoption of Ethereum staking, where users lock up their ETH to help secure the network and earn rewards, further removing it from the liquid market.
Growing Institutional Confidence in Ethereum ETFs
Interest in Ethereum among institutional investors seems to be on the rise, highlighted by U.S.-based spot Ethereum ETFs recording a net inflow of $13.66 million on May 19. Notably, this surge occurred without any outflows across the nine ETFs, signaling a consistent appetite among institutional and high-net-worth investors for exposure to spot Ethereum.
The emergence of Ethereum ETFs is bridging the gap between traditional finance and digital assets by offering regulated access to ETH without the need to engage directly with cryptocurrency infrastructure. These products are gaining momentum, serving a dual role: validating Ethereum’s position as a serious player in the crypto market while also channeling institutional capital more cautiously into the Ethereum network.
The lack of outflows is particularly noteworthy, indicating that new investors are committed to holding ETH as a longer-term position rather than viewing it as a temporary investment. This suggests a greater comfort level among younger investors with retaining Ethereum compared to other assets like Bitcoin.
Conclusion
With record-low balances on exchanges, rising on-chain capital, and increasing institutional inflows, the outlook for Ethereum and Bitcoin is promising. The convergence of these three metrics constructs a powerful narrative.
Last week’s spike in Bitcoin’s price certainly caught attention, prompting an inquiry into the factors behind it. As Coindesk’s John Law summarized in a tweet, the week’s market dynamics are rooted in several key trends.
As Ethereum continues to evolve, Bitcoin maintains its reputation as “digital gold.” Given the ongoing decline in exchange supply for both assets, one must consider the implications for the next one to three months.
Bitcoin seems to be nearing the final phase of its “functional” bottoming process ahead of the next upward cycle, while Ethereum is on the verge of significant “structural” updates. Assuming these narratives hold true, we can glean insights into the future behavior of both assets against the backdrop of dwindling supply on exchanges.