Will Ethereum Surge as Exchange Supply Hits Record Lows?

Overview:

• Ethereum’s exchange supply has dropped to record lows, with only about 8.7% of ETH remaining on centralized platforms, tightening liquid supply.
  

• Growing staking, Layer-2 usage, and long-term custody are absorbing ETH, reducing sell-side pressure despite cautious market sentiment.
  

• Technical indicators and ETH/BTC strength suggest accumulation may be underway ahead of a potential price move.

Ethereum (ETH) is drawing investors' attention as its on-chain metrics hit all-time lows. The amount of ETH on centralized exchanges has dropped to its lowest level since the network launched in 2015, raising speculation that a supply squeeze is building beneath the surface. 

ETH has been trading between $2,800 and $3,200 since early December, with a strong breakout. Currently, the asset is trading around $2,900. 

ETH Exchange Supply Hits Historic Lows

On-chain data from Glassnode indicates that the percentage of ETH on centralized exchanges fell to 8.7% of the total supply, and later stabilized around 8.8%. 

This is the lowest percentage of ETH ever available on exchanges, down 43% since the start of July. 

Such levels are historically significant because exchanges are the primary source of liquidity for trading and selling.

On the other hand, Bitcoin's exchange balance consistently shows a higher percentage, around 14.7%, highlighting how constrained Ethereum’s liquid supply has become.

Experts believe this divergence reflects structural differences in how ETH is used compared to BTC, with Ethereum becoming more committed to long-term or utility-driven use cases.

The “Exchange Supply Ratio” has hit 0.137, a point reached not since 2016.

Historically, low exchange supply has sometimes coincided with large rallies. Notably, Ethereum’s exchange balances fell sharply during the 2021 bull cycle. 

At that time, a supply squeeze preceded roughly a +300% price rally

Why Ethereum’s Supply Is Tightening

Analysts cite multiple reasons for ETH's off-exchange volume. Staking and restaking protocols have increasingly absorbed the supply, with ETH locked to help the network and earn yield at the same time.

Moreover, Layer-2 scaling solutions are growing, using ETH for settlement and gas, thereby reducing the circulating supply.

Apart from the network activity, Digital Asset Treasuries (DATs) and corporate holders have turned out to be key accumulators.

ETH is also used as collateral in decentralized finance (DeFi) and held in long-term personal custody, which has historically prevented the supply from returning to exchanges quickly.

Market watchers interpret that although the market sentiment seems cautious in the near term, it does not have a direct impact on the supply.

If the liquid supply declines when demand is stable or rising, price pressure often emerges with a lag.

Technical Signals Hint at Hidden Demand

The ETH chart is displaying signs of accumulation. One of the significant developments has been the breakout of the On-Balance Volume (OBV) indicator, which is a volume-based metric applied to detect the dominance of buyers or sellers. 

Though ETH's price is still confirming the move with a substantial breakout, such differences are interpreted as indicating "hidden buying strength."

However, OBV breakouts that occur alongside low supply tend to attract attention, as they may lead to price movements.

Also Read: Ethereum Price Drops: Where is the Next Support Level?

ETH Price Action and Key Levels

ETH has largely held above the $3,000 level, demonstrating resilience despite broader market uncertainty. 

Resistance near $3,200 remains a key hurdle. Price has consolidated around the $2,900 zone over the past 24 hours. 

This sideways movement suggests indecision, but also indicates that sellers have struggled to force a deeper breakdown.

The ETH/BTC trading pair has also shown encouraging signs, recently breaking above a long-term downtrend. 

Some analysts interpret this as early evidence of capital rotation back into Ethereum after months of relative underperformance versus Bitcoin.

Institutional Accumulation Adds Another Layer

In addition to the supply narrative, Ethereum's corporate acquisition continues. Some large treasury owners are said to have grabbed more during pullbacks, considering the situation as an opportunity to stock up on ETH, due to the restriction on liquid supply tightness. 

This action is similar to Bitcoin during the accumulation periods.

Experts have drawn parallels between Ethereum and Bitcoin in the past, when high volatility came just before the strong multi-year rallies.

Also Read: Bitcoin Price Trades Near $86,000 as Market Volatility Remains High

FAQs:

1. Why is Ethereum’s exchange supply hitting record lows?
ETH is increasingly locked into staking, Layer-2 networks, DeFi collateral, and long-term custody, reducing the amount available for trading on exchanges.

2. What does low exchange rate mean for ETH price?
Historically, reduced liquid supply can amplify price moves when demand rises, sometimes leading to delayed but sharp rallies.

3. How does Ethereum compare to Bitcoin in exchange supply?
Ethereum’s exchange supply is significantly lower than Bitcoin’s, highlighting stronger long-term holding and utility-driven usage for ETH.

4. Are technical indicators supporting a bullish ETH outlook?
Indicators like On-Balance Volume suggest hidden buying strength, often associated with accumulation before price breakouts.

5. What key price levels should traders watch for ETH?
Support is seen near $2,800-$2,900, while a sustained break above $3,200 could confirm bullish momentum.