The amount of the world’s second-largest cryptocurrency by market capitalization, Ethereum ($ETH), being held on cryptocurrency trading platforms has hit its lowest point since 2015, as nearly 90% of circulating ETH is being held by entities controlling their own wallets.
According to on-chain analytics provider Santiment, the total supply of ETH held on exchanges is currently at its lowest level since July 2015, with only 10.31% of existing ETH available. The remaining almost 90% of Ethereum is being held by wallets controlled by users, at a time in which liquid staking services, allowing them to retain liquidity while staking, are plentiful.
The rise of self-custody has been fueled by increasing concerns about the security of exchanges and the need for investors to have full control over their assets. The rise of decentralized finance protocols on the cryptocurrency’s network have also led to growing demand for $ETH on-chain.
A low proportion of ETH on exchanges means that if significant buying pressure were to be seen on the market, the cryptocurrency’s price would likely go up, as there is little supply readily available to satisfy demand.
As CryptoGlobe reported, over $100 million worth of ETH has been taken off circulation since the cryptocurrency’s network transitioned from a Proof-of-Work (PoW) consensus algorithm into a Proof-of-Stake (PoS) consensus algorithm.
Also read: Does Ethereum Have a Supply Cap?
The cryptocurrency’s deflationary trend has been growing over time, with its supply having dropped by over 66,000 ETH since the network’s merge upgrade over 180 days, to the point there are now 120,456 ETH circulating on the market.
Ethereum transactions started burning ETH after the London hard fork, which included the implementation of Ethereum Improvement Proposal (EIP) 1559. The EIP changed the way transaction fees on the network work. Instead of an auction system, users now pay a base fee for their transaction to be processed by validators, and can alternatively tip them to get their transactions to be processed faster.
Ethereum staking has been seen as a source of revenue for both cryptocurrency holders and exchanges. These platforms offer users a staking service allowing them to maintain liquidity through a separate token while locking their ETH on-chain to earn rewards, and collect a potion of the rewards in exchange.
Nasdaq-listed cryptocurrency exchange Coinbase has, for example, reported revenue of over $200 million in the fourth quarter of last year through its staking, earn, and custody products.
Notably, Ethereum’s highly anticipated Shanghai upgrade is one step closer to being activated on the network’s mainnet, following a final dress rehearsal that was carried out on the Goerli testnet, which involved a simulation of staked ETH withdrawals.
Once activated, the upgrade will complete Ethereum’s full transition to a proof-of-stake (PoS) network, allowing validators to withdraw their staked ether and rewards earned from adding or approving blocks.
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