• Ethereum (ETH) has seen a rapid decline in the amount of coins held on exchanges, now at its lowest level in 5 years.
• The drop is likely due to investors staking their ETH in anticipation of the merge to proof-of-stake last September.
• This has led to decreased liquidity and increased volatility, with aggressive price movements still possible.

ETH on Exchanges at Five Year Low

The amount of Ethereum (ETH) held on exchanges has been rapidly declining over the past five years and is now at its lowest level since 2018. This trend is likely due to a growing number of investors staking their ETH in anticipation of the Merge, which transitioned Ethereum from a proof-of-work system to proof-of-stake last September.

Drop Since Staking Opened Up

The drop off in exchange holdings began when users were able to start staking their ETH tokens late last year. This was followed by the Shanghai upgrade this April, which unlocked access for those who had already committed their funds for staking purposes. The current supply of ETH on exchanges amounts to only 15% of its total supply.

Bitcoin & Stablecoins Fleeing Exchanges

The pattern isn’t exclusive to Ethereum either, as Bitcoin and stablecoin holders have also been withdrawing capital from exchanges over recent months. This decrease in liquidity has caused an increase in volatility across all cryptocurrencies, with sharp drops still possible despite a generally bullish first quarter for crypto markets overall.

ETH Staking Could Change Picture

However, the picture could change if more investors decide to stake their ETH tokens instead of holding them on exchanges. Staked tokens are locked up until they are released back into circulation after a certain period time – usually around 6 months – meaning they can’t be traded or used as currency until then. This could lead to an increase in price stability if enough people choose this option instead of exchanging their tokens for other currencies or fiat money.

Conclusion

In conclusion, while there has been a significant decrease in exchange holdings of Ethereum over the past five years, it is likely driven by people opting for long term staking options rather than immediate trading profits or speculation opportunities offered by other cryptocurrencies or fiat money alternatives. The situation may change if more investors decide to stake their ETH tokens instead but that remains uncertain for now given current market conditions and sentiments towards cryptocurrency investments as a whole .