Analysts anticipate Ethereum supply shock after 100K ETH burned

  • More than 6% of Ethereum's total supply is staked in the ETH2 contract.
  • Ethereum reserves on centralized exchanges have plunged to 18.98 million, and inflows have substantially reduced, leading to a supply shock.
  • Ethereum's mean dollar invested age dips, indicating that dormant dollars invested in the altcoin have started circulating. 
  • These factors are considered bullish indicators for the altcoin's price.

"Triple Halving" narrative underplays as Ethereum's supply on exchanges drops, and the bullish trend resumes. 

Ethereum supply shock is on the horizon

After implementing Ethereum Improvement Proposal 1559 (EIP 1559) in the London Hard Fork, over 100,000 ETH was burned. At the same time, there is an increase in Ether being staked in the ETH2 contract. 

Staking can be considered as a form of "enforced holding." Based on this narrative, since over 6% of Ethereum's supply is now staked, and $100,000 is burned, which is fueling a "supply shock" across exchanges. 

Exchanges' ETH reserves have dropped considerably in the past two weeks, hitting a low of 18.98 million. 

Ethereum reserves on centralized exchanges.

Ethereum reserves on centralized exchanges.

Inflows to exchanges are stifled, and Ethereum netflow on exchanges is low. This signals that less Ethereum is available on exchanges to buy/sell, thus encouraging holding behavior in traders. 

Alongside the supply shock, Ethereum's mean dollar invested age, a metric that calculates how long Ethereum has stayed in its current address and computes the average age of all money invested in Ether, has started decreasing over the past three days. 

A dip in mean dollar invested age signals a movement in the dormant investments made in Ether. Historically, this is a precursor of a price rally in the altcoin. If this downtrend continues, it is likely to impact Ethereum's price positively. 

According to analysts at FXStreet, if Ethereum sustains above its support at $3000, the bullish trend is likely to continue. 


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