According to recent data, major crypto assets are experiencing significant decline in exchange inflows. Exchange inflow for an asset is defined as the amount of coins deposited into the exchange wallets.
Data from Glassnode, an on-chain analytics firm, featured the trend for cryptocurrencies like Bitcoin, Ethereum, BUSD, USDT, USDC and DAI. According to data, exchange inflows for major assets have been hovering at an extremely quiet $1.84 billion. Notably, this is about $10.36 billion lower than the peak inflow experienced across the May 2021 sell off.
The drawdown represents about 85% decline from the peak about 2 years ago. Analysts anticipate this to be largely driven by the recent capitulation and exit liquidity events. Notably, large inflows represent bearish sentiment while declining values signify the opposite.
At the same time, another set of data derived from exchange on-chain flows reveals that there has been considerably weaker demand since April. Glassnode’s data suggests that major shifts underway in stablecoins, with USDT supply at new all-time highs (ATHs), whilst USDC and BUSD fell to multi-year lows. Notably, considering that stablecoins are non-interest-bearing, and regulatory pressure in the US is building, it suggests US capital is now less active in digital assets.
Data also suggests that there has been a significant drop in the overall supply of Ethereum which is being held on exchanges. As per most recent data, the percentage held on exchanges has reached 14%, marking the lowest level in seven years since July 2016. Notably, the declining trend has been continuing in recent times as reported by Todayq News.
Analysts suggest that in the case of Ethereum, there has been a significant decrease in the balance held on exchange particularly post the Merge and the speed around the time upscaled as well.
In 2022, during the event referred to as “The Merge,” the legacy Ethereum blockchain merged with the Beacon Chain, effectively switching Ethereum from a Proof-of-Work (PoW) to a PoS network. The switch to the PoS mechanism is believed to be less energy-intensive and provides a platform for implementing new scaling solutions.
Additionally, as per data, about 16.04% of the total Ethereum supply is currently being staked. Reportedly, the current staked amount of ETH stands at around 19.29 million. Since the Shanghai upgrade, only 3 million ETH have been unstaked. This indicated that most of the ETH has remained locked in the network.
There has been a similar trend in the case of Bitcoin as well considering the declining balance on the exchanges and the increasing willingness to accumulate the holdings between the investors. In particular, whales and shrimps have intensely accumulated Bitcoin in recent times.
Notably, the decline in asset’s supply on exchanges is generally seen as a bullish sign for several reasons. One of the key reasons behind it is implied to be there are fewer coins available on exchanges to be sold. This limited availability can create a supply-demand imbalance, potentially driving up the price of assets.