After hitting its latest all-time high of $4,956 on August 23 on Binance, Ethereum (ETH) has been trading in a tight range – oscillating between $4,200 to $4,500 – giving little clues about its next potential direction. However, recent exchange data suggest that a supply crunch may be nearing for ETH.
Although ETH’s price has remained in the mid $4,000 range, its ESR tumbled from 0.041 to 0.037 – marking the biggest decline within the observed period – in a matter of just two weeks.
It’s worth highlighting that ETH’s price has remained stable all this time, trading close to $4,400 at the end of the period. According to the CryptoQuant analyst, such price behavior can explain two things.
First, it signals that investors are withdrawing from exchanges – including Binance – at an accelerated pace. Further, it also shows growing confidence among ETH holders as they opt for self-custody in cold wallets instead of keeping their holdings on exchanges.
Arab Chain remarked that a combination of stable price, declining exchange supply, and healthy exchange-traded fund (ETF) inflows confirms that sellable supply is dwindling while the demand for the digital asset remains strong. They added:
Declines in ESR have historically preceded strong upward moves, as lower exchange liquidity limits sellers’ ability to push prices down. The current ESR levels have fallen back to pre-June figures, suggesting that the market has effectively “flushed out” previous profit-taking activity and is now reaccumulating supply into long-term wallets.
The analyst concluded by saying that if ETH’s ESR continues to fall without a corresponding decline in price, then it would mean that the market is entering a new, institutional investor-led bull cycle. Three metrics in particular support this prediction.
The ETH market has seen a recent drop in leverage, meaning there are fewer traders with speculative positioning. Further, most perpetual futures markets show neutral funding rates for ETH contracts. Finally, the on-chain activity by ETH whales has also subsided, meaning long-term holders are not selling.
