Ethereum Exchange Supply Hits 10-Year Low—What’s Next for ETH Price?

• Ethereum exchange supply has dropped 16.4% over the past seven weeks amid growing investor interest in staking protocols and DeFi.
• Layer-2 solutions like Arbitrum and Base have attracted significant user activity, reducing Ethereum’s fee revenue from $218 million in December to $46 million in February.

The available Ethereum supply on centralized exchanges has fallen to its lowest point since November 2015 with only 8.97 million ETH out there. This drop indicates a changing trend in investor behavior, fueled by the increased use of decentralized finance (DeFi) and staking.

Ethereum Supply, On-chain Metrics & Technicals

According to Santiment, Ether owners are increasingly choosing to lock their assets in staking protocols rather than leave them in exchanges. This is what has seen a 16.4% decrease in ETH’s exchange supply over the last seven weeks, which is an indication of long-term accumulation trends. In spite of this constrictive supply, Ethereum price has lagged, declining 47% from its December high of $4,105 to a recent low of $1,990.

On-chain metrics and technicals imply further downside for Ether. Standard Chartered’s analysts have downgraded their end-of-year price forecast for ETH, cutting their estimate to $4,000 from $10,000, as highlighted in our previous story. One of the major reasons behind this downgrade is the growing competition from Ethereum’s own layer-2 networks. These lower-fee scaling solutions have drawn a considerable percentage of users and siphoned activity away from the Ethereum mainnet.

Statistics from DeFiLlama show that in the last week, decentralized exchanges (DEXs) on Ethereum processed $9.64 billion in volume. Most of this traffic ($5.67 billion) was handled by layer-2 solutions like Arbitrum and Base. The flow of transactions has affected the general economic model of Ethereum. DEX volumes on Ethereum’s native network dropped from $92 billion in December to $82 billion in February.

Another major issue is Ether’s declining fee revenue. With declining mainnet activity, the network’s capacity to earn fees has diminished. Transaction fee revenue has dropped from $218 million in December to a mere $46 million in February. Although the recent Dencun upgrade dramatically cut gas fees by 95%, it has not yet shown up in the form of rising transaction volume or network revenue. Likewise, Ethereum’s TVL has decreased from $76 billion in December to $46 billion, an indicator of the general drop in network activity.

What’s Next For ETH Price?

One possible driver of Ethereum’s potential rebound could be ETFs that include staking. The New York Stock Exchange and the Chicago Board Options Exchange have both filed proposals with the U.S. Securities and Exchange Commission to permit Ethereum staking in ETFs. Institutional demand is still tepid, though, with spot Ether ETFs experiencing $370 million in net outflows over the last month.

Technically, ETH is facing resistance at $2,042, with its 50-day moving average serving as a lid. The Relative Strength Index (RSI) stands at 41.22, reflecting weak momentum. Bollinger Bands indicate low volatility, which is a sign of consolidation. Although Ethereum is slowly coming out of oversold levels, low trading volume indicates uncertainty in the market.

Should Ethereum break above $2,042, the next possible price points are $2,163 and $2,370. If the support at $1,986 is breached, then ETH might slide to $1,714, an area where there has been previous buying interest.

On the other hand, asset managers like Bitwise are pushing to introduce staking features to Ethereum ETFs, which have seen major outflows over the past few weeks.