$3B ETH Withdrawals from Exchanges Signal Potential Supply Squeeze for Ethereum

$3B ETH Withdrawals from Exchanges Signal Potential Supply Squeeze for Ethereum

Following the U.S. approval of spot Ethereum (ETH) exchange-traded funds (ETFs) on May 23, over $3 billion worth of Ether has been withdrawn from centralized crypto exchanges, hinting at a possible future supply squeeze. CryptoQuant data reveals that between May 23 and June 2, approximately 797,000 Ether, valued at $3.02 billion, were moved off exchanges.

This significant reduction in exchange reserves suggests that investors are transferring their Ether to self-custody solutions, indicating a preference for holding over immediate selling. Fewer coins on exchanges typically imply reduced availability for sale, which can lead to tighter supply conditions. Supporting this trend, data from Glassnode, shows that the percentage of circulating Ether held on exchanges has dropped to its lowest level in years, now standing at just 10.6%.

The approval of Ether ETFs has sparked considerable interest, with Bloomberg ETF analyst Eric Balchunas suggesting that these ETFs could realistically launch by late June. Some market analysts predict that the introduction of spot Ethereum ETFs could propel Ether to surpass its all-time high of $4,870, set in November 2021.

However, concerns remain about the potential impact of Grayscale’s Ethereum Trust (ETHE), which manages $11 billion in assets. If it follows the pattern of the Grayscale Bitcoin Trust (GBTC), which saw $6.5 billion in outflows shortly after approval, it could significantly influence ETH’s price dynamics.