More Downside Ahead For Ethereum? Santiment Data Reveals Sellers Circling Around Merge

Data shows that the holdings of top exchange addresses are growing more rapidly than top unhosted wallets as The Merge approaches.

In a tweet on Wednesday, Santiment Feed reveals that since May 10, the balances of unhosted wallets of Ethereum whales have shrunk by 11%, while the holdings of leading addresses on crypto exchanges have almost doubled, growing by a whopping 78%.

“The gap between Ethereum’s top 10 largest non-exchange addresses & exchange addresses is closing as we head toward the merge in 3 weeks. Since May 10th, these top non-exchange ETH addresses hold 11% fewer coins, & top exchange addresses hold 78% more,” Santiment wrote.

? The gap between #Ethereum‘s top 10 largest non-exchange addresses & exchange addresses is closing as we head toward the #merge in 3 weeks. Since May 10th, these top non-exchange $ETH addresses hold 11% less coins, & top exchange addresses hold 78% more. https://t.co/k5OlJ1hG3D pic.twitter.com/XOAVhXaKPG

— Santiment (@santimentfeed) August 24, 2022

The above chart revealed that Ethereum’s top non-exchange addresses are reducing holdings while exchange addresses holding ETH continue to grow.

It is worth noting that the increased inflow of a cryptocurrency to exchanges usually indicates the desire of holders to sell. Consequently, from Santiment’s data, holders may be looking to dump Ethereum as The Merge approaches.

As reported by The Crypto Basic on August 12, this is a scenario that options traders may be expecting. Glassnode analysts revealed that “traders are paying a premium for ‘sell-the-news’ put-option protection post-Merge.”

Meanwhile, on August 19, chart analyst Ali Martinez noted that Ethereum risked a 28% price correction. Additionally, the analyst noted that Ethereum had breached the rising wedge pattern to the downside, explaining that failure to hold the $1700 price point could prove deadly as over 680k addresses bought at that price and could panic sell if the level is breached.

Notably, as also reported by The Crypto Basic, CoinShares Chief Strategy Officer (CSO), Meltem Demirors, implied that The Merge had little price implications for Ethereum. According to the executive, no new institutional capital is coming in because of the upgrade.

However, not all analysts are pessimistic about The Merge. Earlier in the month, controversial BitMex founder Arthur Hayes had said he is betting it all on Ether. He also expressed the belief that holders are not likely to dump their assets following The Merge as Ethereum becomes more deflationary.

Notably, Lark Davis explains that Ethereum’s annual issuance following The Merge will reduce from 4.3% to 0.43%. Effectively, the analyst explains that the amount of Ethereum created daily drops from 13,000 to 1,300. According to Davis, this reduced supply, the dynamics of the staking economy that encourages validators to hold on to their coins for more rewards, and the increasing demand for the asset will make ETH more deflationary and potentially boost its value.

The Merge is Ethereum’s migration from the proof-of-work (PoW) consensus mechanism to proof-of-stake (PoS). The crypto community expects the upgrade to happen on September 15.

In anticipation of The Merge, Ethereum has seen significant price volatility. It is currently trading at the $1,676.77 price point, 3.34% up in the last 24 hours.