Ethereum Held By Cryptocurrency Exchanges Decline Sharply This Year

According to on-chain statistics, investors transferred a substantial amount of Ethereum in 2022, as ETH holdings dropped by more than 30%. As one expert suggested in an article on CryptoQuant, these speculators may have pulled out with the intention of holding on for the long term. The "exchange reserve" is a statistic that indicates the total amount of Ethereum currently held in the wallets of all centralized cryptocurrency exchanges.

When the valuation of this statistic increases, it indicates that holders are currently transferring their crypto tokens to cryptocurrency exchanges. One of the main factors that investors employ in cryptocurrency exchanges is to convert their ETH into some other cryptocurrency or fiat currency. Therefore, an increase in the cryptocurrency exchange reserve can have a negative influence on the valuation, since it acts as the dumping offer of the asset.

A decrease in the value of the indicator, on the contrary, indicates that investors are withdrawing their crypto tokens, indicating that the amount of sale is decreasing. Long-lived crypto exchange outflows may indicate that holders are actively accumulating, signaling that they are positive on the cryptocurrency. Here is a chart depicting the evolution of Ethereum exchange holdings over the past few years.

As seen in the chart above, Ethereum exchange holdings began to fall in 2021, but the loss accelerated in 2022. The indicator used in this case is the "all exchanges" variant, which includes data from the markets at cash and derivatives.

Following the demise of FTX, the rate at which the metric value has decreased is an interesting pattern to observe. This is because the failure of a well-known cryptocurrency exchange like FTX has made investors more wary of centralized platforms than ever before, resulting in a large exodus of cryptocurrency from cryptocurrency exchanges to private key wallets. private.
Throughout this year, the entire Ethereum exchange reserve has decreased by more than 30 percent. The quant states that the potential for a deflationary ETH has been among the most positive developments of the year. Investors seem to agree, as they have withdrawn substantial amounts of CEX with the intention of retaining it for the foreseeable future.