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Ethereum Exodus: Analyzing $177.65 Million Withdrawal from Crypto Exchanges

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In a surprising turn of events, approximately 110,000 Ethereum were withdrawn from known crypto exchange wallets within the past 24 hours, accounting for a staggering $177.65 million, as reported by onchain data from Santiment. This massive movement of funds raises questions and invites deeper analysis into the dynamics of the cryptocurrency market.

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Source: X

Firstly, such a substantial withdrawal could signify a significant shift in investor sentiment. Crypto exchanges serve as liquidity pools and are often seen as a reflection of the crypto market’s overall health. When substantial amounts of ETH are pulled out simultaneously, it suggests that investors are looking for alternatives to traditional exchange platforms, possibly indicating a growing desire for self-custody solutions like hardware wallets.

Moreover, the timing of this withdrawal is noteworthy. The cryptocurrency market has been marked by extreme volatility, regulatory concerns, and market sentiment fluctuations over the past few months. Investors may be seeking refuge from these uncertainties by moving their assets off exchanges and into more secure storage options. This move towards self-custody aligns with the core principles of decentralization upon which cryptocurrencies are built.

Ethereum’s Short-Term Price Challenges

Despite these developments, Ethereum’s Total Value Locked (TVL) in decentralized finance (DeFi) has experienced a 5% decline year-to-date (YTD), according to DeFi Llama. However, this should not be seen as a negative sign for ETH. A closer examination of on-chain data reveals that much of the TVL has migrated to layer 2 scaling solutions like zkSync, Scroll, Arbitrum, and Optimism. Ethereum, with its robust network activity and security, remains the premier smart contract platform.

In terms of price, Ethereum’s short-term outlook is currently facing challenges. It is trading within a range of $1,750 to $1,577, with recent rejection from the range highs. This bearish sentiment suggests that a retest of the range lows is likely in the coming days. Bulls must overcome these hurdles to regain investor confidence.

In conclusion, the significant outflow of Ethereum from exchanges signify a dynamic shift in the cryptocurrency landscape. The entrance of major financial players into Ethereum investment products highlights the growing mainstream acceptance of cryptocurrencies. Meanwhile, the movement of TVL to layer 2 solutions showcases Ethereum’s adaptability and long-term potential. Ethereum’s price, while facing short-term challenges, remains closely watched by the crypto community, and its future evolution promises to be an exciting journey for investors and enthusiasts alike.

Ethereum’s Gas Fees And Supply On Exchanges Hit Historic Low

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Ethereum, the world’s second-largest crypto has registered some notable activity. As highlighted by prominent on-chain analytics firm Santiment, ETH’s average transaction fees have fallen by 70% to $4.28 after its previous peak of $14 in early May.

Despite being widely used, the ETH network has been known to turn consumers away because of the high gas costs associated with network transactions.

Gas fees are the computational resources essential to carry out transactions on the network. There can be various reasons for high gas fees such as popularity & network congestion – Limited gas space per block – Varied gas consumption based on tx complexity – Increased complexity of dapps & smart contracts

Santiment believes the Ethereum network will benefit from the falling transaction cost as more people would be able to use the network due to affordability, thereby boosting its utility.

Moreover, there have been serious efforts to address Ethereum’s scalability issues, notably the Cancun-Deneb upgrade that targets the scalability of the Ethereum blockchain.

Here, Proto-Danksharding, also known as EIP-4844, is the main focus of the update. Proto-Danksharding is a critical component of Ethereum’s long-term rollup-centric roadmap and is anticipated to enhance data accessibility for rollups and lead to a large decrease in gas fees on Ethereum Layer-2 rollups.

Along with the decreased costs, Ethereum is now trading at an all-time low of 9.9% on exchanges as owners have displayed stronger convictions than selling off and held onto their assets more firmly.

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Ethereum's Gas Fees And Supply On Exchanges Hit Historic Low 3

The amount of ETH on exchanges has decreased to levels last seen in the early days of the altcoin as staking consumes the available tokens.

Since the Shapella upgrade, more than 4 million more coins have been deposited and added to the Eth network, indicating that major Eth holders are increasingly choosing to create passive income rather than sell their holdings.

Ethereum Headed For A Price Upswing

Market experts believe that this decrease in supply on exchanges is a positive sign as it might indicate an impending price upswing and a bull run.

In fact, both ETH and BTC have moved significantly off exchanges, which is why investors continued to paint a bullish picture of the assets.

According to data from Coinglass, funding rates for BTC and ETH have continuously been favorable on a number of exchanges. This implied that the majority of investors were betting on an eventual rise in the price of both cryptocurrencies.

Ethereum’s Total Supply Drops By $200M Since Merge

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Ethereum’s Merge not only changed the network’s consensus mechanism from an energy-intensive proof-of-work system to a more environmentally friendly proof-of-stake one, but it also had an impact on supply.

The reason for this is quite simple- the Ethereum blockchain has to release a lot less ETH to compensate stakers than it did to reward miners.

The supply of ether has decreased by almost 100k, according to data from the Eth tracking website ultrasound.money. The total supply of ether has dropped during the last 200 days by 103,092 coins, or more than $200 million at the current price.

Furthermore, ultrasound.money stats showed that throughout the same time period, $1.2 billion was taken out of the ether supply.

At the time of this post, the supply of ether stood at 120,416,154 million coins.

One of the factors providing deflationary pressure to the ETH supply is the “Ethereum triple halving” 

The phrase was created in reference to the Bitcoin halving, a feature of the Bitcoin protocol that reduces the supply of new BTC coins by half about every four years.

The triple halving of Ethereum, in contrast to the halving of Bitcoin, is not a real occurrence that is part of the Ethereum protocol.

Instead, it’s a word that the Eth community used to explain how new processes added to the protocol are helping reduce the supply of ETH.

The concept of the Ethereum triple halving consists of three main parts:

  1. Reduced ETH issuance under Proof-of-Stake consensus.
  2. ETH burning via the EIP-1559 upgrade.
  3. Ethereum staking lowers the amount of ETH that is effectively in circulation.

Out of the two, the third component of Ethereum’s triple halving has recently lost some of its significance. This is due to the Shapella upgrade’s addition of the option to withdraw staked ETH currencies, which went live on April 12, 2023.

Ethereum Roadmap Post Shapella

Following the launch of the Shapella hard fork on April 12, the ETH roadmap has a number of other significant changes planned.

The first in line is the EIP-4844 Cancun hard fork, which will open the door for “proto-dank sharding,” a technique rollups can use to add less expensive data to blocks.

Next is Distributed Validator Technology [DVT] which aims to enhance the operation of the ETH validator.

The Proposer-Builder Separation [PBS], which aims to maintain the decentralization in how blocks are built, is the last milestone on the ETH roadmap.