Ethereum saw its exchange balances drop through 2021. The decline occurred despite continued market rallies, which sent Ethereum to new highs. Investors had been accumulating coins all through bull rallies, rather than trying to sell their coins. The result was a reduced supply of coins on centralized exchanges. DeFi, which is gaining popularity, also helped propel this trend. But, the trend is now starting to reverse with an increase in exchange balances.
Ethereum Exchange Balances Touch 3 Month High
According to new on-chain reports, Ethereum exchange balances continue their upward trend. Inflows to the Ethereum exchange have started to increase after hitting a one-year low in 2021. Balances are now at three-month highs.
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Glassnode data shows this number has fallen by over 700,000 Ethereum from December’s lows. In the New Year, this indicator which was inversely related to the price of the cryptocurrency asset continued. In contrast to the decline in exchange balances due to the rise of cryptocurrency, current balances show a steady upward trend.
📈 #Ethereum $ETHJust three months ago, the Balance on Exchanges hit a new 3-month high at 14,715,388.749ETH
On 21 February 2022, the previous 3-month record of 14.714,748.847.847 Ethereum was reached.
View metric:https://t.co/1dCpD2ey8E pic.twitter.com/TQHqaM3OOi
— glassnode alerts (@glassnodealerts) February 22, 2022
Investors are beginning to liquidate their Ethereum holdings in order to protect themselves from losses due to the continuing decline of Ethereum. These large flows have resulted from exchanges. The number of ETH that was left on exchanges reached 14,714,748.847 as of February 21st. If the current trend continues, then more ETH might end up on centralized Exchanges. These exchanges are more likely for investors to sell off after a prolonged period of accumulation.
The Reaction of ETH
This new metric has been received well by Ethereum. If centralized exchange balances drop, this indicates that investors may not be ready to sell and the market value is increasing. Investors that move large amounts of their holdings onto exchanges indicate they are ready to sell. This will adversely affect the market price for the digital asset.
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Ethereum’s recent drop has caused it to trade below the 100-day simple moving mean and is now trading at its six-month lowest level. Investors are not as willing to buy the digital asset at the same prices that they were in the past few months.
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The sentiment is also strongly biased towards the sell side with 72%. Strong sell sentiments have been observed across all indicators: short-, medium-, and long-term. This suggests that sell-offs will likely continue.
The $2,748 resistance mark is the next for the digital asset. However, with the current trend, it’s more probable that ETH will reach its 2nd support level at $2,496. Before reversing, this resistance point could be tested. But, it is possible that ETH will start a recovery trend and touch below $2,500.
Featured Image from News18. Chart by TradingView.com