Ethereum milestone: More ETH on staking than on crypto exchanges for the first time

A historic event for the Ethereum (ETH) community. For the first time, more ETH are on staking than on crypto exchanges.

Just recently, Ethereum positions on crypto exchanges reached a new record low. Never before have investors held so little ETH on centralized crypto exchanges. Many of them probably decided to manage their ETH themselves or invest in staking services because of the FTX debacle, the uncertainties at Binance and the SEC's anti-crypto regulatory offensive in the US. Now, for the first time, the amount of ETH in staking greater than the amount of ETH held on crypto exchanges. This fundamental change could have a major long-term impact on Ethereum's price momentum. A rising stake rate and an ever-shrinking stock of ETH on centralized crypto exchanges are causing the supply of Ethereum to become tighter. Thus, if demand for ETH remains flat or increases, this will exert positive buying pressure on the Ethereum price. Thus, on-chain data currently paints an increasingly positive picture for Ethereum.

Ethereum on staking exceeds exchanges reserves

Data from cryptanalysis company Nansen illustrate this historic event. Currently, about 23.81 million ETH, worth about $44.39 billion, are on staking, while only 23.36 million ETH, worth $43.55 billion, are still held on centralized crypto exchanges.

Impressively, both figures represent about 20 percent of total ETH. By comparison, at the beginning of the year there was still more than 40 percent more ETH on exchanges than on staking. A staking shift that clearly demonstrates the change in Ethereum's market dynamics.

This development has led to a decline in ETH on exchanges of about 20 percent since the beginning of the year, equivalent to about 5.1 million ETH or US$9.51 billion. At the same time, the amount of ETH used for stakes has increased by a third, representing an increase of 5.9 million ETH or just under US$11.1 billion.

More and more investors are pulling ETH away from stock markets

The U.S. Securities and Exchange Commission's (SEC) actions against centralized crypto exchanges such as Coinbase, Binance en Co. have been one of the main reasons why ETH holdings have increasingly moved from exchanges to stake and private wallets in recent months. Investors seem to be reacting to regulatory concerns and uncertainties and are withdrawing their Ethereum holdings from the exchanges.

In addition, the upgrade of Shappella contributed to increased Ethereum staking, as the associated risks have decreased. This has boosted investor confidence and caused stakes to increase.

Increasingly scarce ETH supply meets rising demand

One of the consequences of these developments is that the percentage of ETH held in smart contracts has risen sharply. Currently, nearly 31 percent of all ETH in smart contracts. In early 2023, this percentage was still around 26 percent.

The percentage of ETH in smart contracts is therefore an interesting indicator to understand the real scarcity of ETH supply in the context of the evolution of the decline of ETH holdings on centralized crypto exchanges.

If more and more long-term ETH is tied up in smart contracts, it indicates that less ETH is available for active trading. Users use ETH in decentralized applications such as NFT- and DeFi-protocols, for example, to engage in yield farming or to take out loans. The percentage of ETH in smart contracts thus provides information about how investors are using their ETH and shows how scarce the supply of Ethereum actually is. The higher the percentage, the lower the available supply in the market, which is fundamentally bullish for the ETH Price.