The recent introduction of crypto-related spot ETFs in the United States has caused Bitcoin and Ethereum supplies on centralized exchanges to hit record lows. Glassnode data reveals that Bitcoin balances on exchanges have dropped to 11.6%, marking the lowest level since December 2017. Similarly, Ethereum balances have reached a low of 10.6%, the lowest since October 2015.
Effect of SEC Approval on Exchange Balances
Market experts attribute the decline in exchange balances to the Securities and Exchange Commission’s (SEC) approval of ETF products for Bitcoin and 19-b filings for Ethereum. HeyApollo data shows that spot Bitcoin ETFs have accumulated 857,700 BTC, valued at $58.5 billion, within just five months. Leading the pack is BlackRock’s IBIT ETF with around $20 billion in assets, followed closely by Fidelity’s FBTC with approximately $11 billion. On the other hand, spot Ethereum ETFs are yet to begin trading, but investor anticipation has prompted significant withdrawals from exchanges. CryptoQuant data indicates that 777,000 ETH, amounting to approximately $3 billion, have been removed since the SEC’s approval. The option to stake ETH has also contributed to the decrease in exchange balance, with 32.8 million ETH, equal to 27% of its total supply, currently staked to support the network.
Predictions of a Supply Crunch
As exchange balances continue to decline, market experts speculate that a supply crunch for Bitcoin and Ethereum may be on the horizon. Leon Waidmaan, editor of BTC Echo, recently warned investors to prepare for a “supply squeeze” and the potential for “the next big move” in the market. Historically, when digital assets are withdrawn from exchanges, it indicates investors’ intention to hold rather than sell, signaling bullish sentiment and expectations of future growth. If the current accumulation trends persist, a supply squeeze could have a significant impact on prices by limiting the available supply, potentially leading to substantial price increases.
