Ethereum Exchange Balance Hits Five-Year Low: Here’s Why
• Ethereum exchange balance has decreased to a five-year low, with more holders opting for self-custody options and DeFi platforms.
• The downturn in the crypto market, the switch to PoS, as well as SEC’s regulatory crackdown may have contributed to this trend.
• According to a recent Glassnode chart and ETH exchange netflow, outflow of ETH from exchanges is dominating over inflow.
Ethereum Exchange Balance Hits Five-Year Low
Ethereum’s exchange balance has hit a five-year low, as more holders moved their assets to self-custody options and DeFi platforms. This decline can be attributed to various factors such as the downturn in the crypto market, the switch to PoS consensus protocol, and the SEC’s regulatory crackdown.
ETH Exchange Netflow Flashes Negative
A closer examination of Ethereum’s exchange netflow reveals that outflows of ETH from exchanges have exceeded inflows. Currently, the net flow of ETH on exchanges remains negative with outflows continuing to dominate. This indicates that more holders are choosing alternative storage methods instead of leaving their assets on centralized exchanges.
Rise Of Decentralized Finance (DeFi)
The rise of decentralized finance (DeFi) protocols built on Ethereum’s network is another possible factor behind this trend. Many holders have moved their funds from centralized exchanges to DeFi protocols for higher yields through liquidity provision, staking or other forms of participation in decentralized finance projects. Additionally, 15% of all circulating coins are currently being staked for rewards which could also attribute to ETH holders moving away from exchanges.
FTX Crash Sparked Fear In Crypto World
The beginning of the year was marked by FTX crash which sent shockwaves through the crypto world causing many holders to question safety of keeping their assets on exchanges resulting into renewed interest in self custody solutions for securing crypto holdings..
In summary, Ethereum balances held on exchanges have been steadily declining due to several factors such as DeFi platforms offering higher yields than centralized ones and fear created by incidents like FTX crash leading towards increased preference for self custody solutions amongst investors