Update Feb. 18, 1:52 p.m. UTC: This article has been updated to include quotes from Bitget COO Vugar Usi Zade.
Ether reserves across centralized exchanges hit an almost nine-year low, reinforcing investor optimism for a potential market bottom that may start a recovery toward the $3,000 psychological mark.
Ether (ETH) reserves across all exchanges fell to 18.95 million on Feb. 18, marking their lowest level seen since July 2016 when Ether was trading around $14, CryptoQuant data shows.
Ether exchange reserves, all exchanges, all-time chart. Source: CryptoQuant
Diminishing Ether supply on exchanges may signal an incoming price rally driven by a “supply shock,” which occurs when strong buyer demand meets decreasing available ETH, leading to price appreciation.
ETH/USDT, Year-to-date chart. Source: Cointelegraph/TradingView
However, Ether has struggled to gain momentum over the past year, falling over 3.67% on the yearly chart and declining over 19% year-to-date (YTD), TradingView data shows.
Related: Ether traders eye growth as options market leans bullish
Ether moving off exchanges is a “bullish” signal
The diminishing Ether supply on exchanges suggests investors are moving their ETH into cold storage wallets for long-term holding.
Ether supply moving off exchanges is a “generally bullish” signal, according to Nicolai Sondergaard, research analyst at Nansen crypto intelligence platform.
The analyst told Cointelegraph:
“We are seeing similar trends for BTC, which makes me think if we a) are seeing demand outpaces supply and, or, b) is this a natural shift toward self-custody and cold storage.”
“Regardless, I see it as being positive for both, even if the above reasons likely aren’t the only factors in this shift,” added the analyst
Decreasing Ether supply indicated that “investors are shifting assets to cold storage rather than positioning for short-term sales,” which historically “correlated with reduced sell-side pressure and price stabilization,” Vugar Usi Zade, chief operating officer at Bitget, told Cointelegraph.
Still, Ether faces significant resistance at $2,750 and $2,800.
ETH Exchange Liquidation Map. Source: CoinGlass
A potential Ether rally above $2,800 would liquidate over $822 million worth of leveraged short liquidations across all exchanges, CoinGlass data shows.
Related: 2.5M Bitcoin left on crypto exchanges signals “supply shock”
The next Ether price catalyst
The potential introduction of staking for Ether exchange-traded funds (ETFs) may also be a catalyst for ETH price, according to Marcin Kazmierczak, co-founder and chief operating officer at Redstone:
“The potential introduction of staking ETFs could be a game-changer, further tightening Ethereum’s liquid supply and reinforcing its value proposition as a prime investment asset.”
Ether ETF issuers are expecting regulatory approval for staking, according to Consensys founder Joe Lubin.
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