Ethereum, the world’s second-largest cryptocurrency by market capitalization, has seen a significant shift in its dynamics. Ethereum’s supply on exchanges is at an all-time low of 9.9%, a trend indicative of the increasing interest and trust in self-custody within the crypto community.
That’s according to data from popular cryptocurrency analytics firm Santiment. The shift away from exchanges towards self-custody, where individuals hold their own private keys rather than entrusting them to an exchange, has substantial implications, as it signifies that more investors are choosing to hold their ETH long-term, a move that can potentially tighten the market and exert upward pressure on the price.
Put simply, less supply on exchanges means that there are less tokens readily available to be bought, meaning that higher demand could have a heavier influence on price.
While exchanges offer convenience, they also represent a single point of failure, exposing users to the risk of hacking and system failures. By taking control of their own private keys, crypto enthusiasts are demonstrating a heightened level of sophistication and a greater commitment to the principles of decentralization that underpin the crypto movement.
Adding to Ethereum’s positive momentum, the cryptocurrency’s average transaction fees have recently returned to more affordable levels following a 2023 high of $14 per transaction in early May.
Lower fees increase the utility of Ethereum’s network by making it more cost-effective for users to execute transactions and interact with decentralized applications, thereby fostering greater network usage and, in turn, enhancing Ethereum’s value proposition.
As CryptoGlobe reported, supporting the drop in supply on exchanges was the crypto trading platform KuCoin, which in September 2021 saw thousands of its deposit addresses send tens of millions of dollars worth of ETH to a burn address, for unclear reasons.
The unusual event, which spanned over three days starting on September 7, involved over 3,500 transactions of Tether’s $USDT stablecoin and ETH, according to information first spotted by Coinbase Director Conor Grogan, who pointed it out using Arkham Intelligence data.
Moreover, Ethereum underwent an upgrade back in 2021 known as EIP-1559, which introduced a mechanism to burn a portion of the gas fees with each transaction. The upgrade, coupled with the recent Merge that saw Ethereum become a Proof-of-Stake network, has seen the total supply of Ethereum drop over the transaction fees being burned.
The supply of Ethereum dropped by about $275 million, or 143,000 ETH, which were destroyed in May 2023 after 56,680 tokens were issued, and 199,670 were burned. This resulted in a negative supply growth of 1.46%, showing that Ethereum is becoming deflationary, which some believe could help boost the cryptocurrency’s price in the future if demand rises.
As reported VanEck, a global asset manager, predicted that Ethereum could reach $11.800 by 2030 based on a valuation model that accounts for its recent hard fork and its competition with US T-bills.
The model estimates Ethereum’s revenues, cash flows, and multiples using various assumptions and scenarios. The model also recognizes Ethereum’s role as a store-of-value asset and a global settlement network for smart contract platforms.
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