Ether Supply on Exchanges Falls to Record Low, Raising Supply Squeeze Hopes

Ether held on centralized exchanges has fallen to its lowest level in history, fueling speculation that a supply shortage may be brewing below the market surface.

Key Takeaways:

• ETH exchange balances have fallen 43% since July to a record low of 8.7%.

• Staking, L2 activity, DATs and long-term custody are tightening the liquid supply.

• Analysts are seeing latent purchasing power, indicating potential bullish momentum.

According to Glassnode, exchange balances fell to 8.7% of the total ETH supply last Thursday; This is the smallest share recorded since Ethereum’s launch in 2015. Levels remained near that low at 8.8% on Sunday.

The sharp decline represents a 43% decline in ETH exchange balances since the beginning of July and coincides with the acceleration of digital asset treasury (DAT) purchases and increased activity in the broader Ethereum ecosystem.

Macro research firm Milk Road noted that ETH has “quietly entered the tightest supply environment ever,” noting that Bitcoin’s foreign exchange balance remains significantly higher at 14.7%.

Analysts attributed this change to structural changes in how ETH is used. More tokens, staking, restaking protocols, layer-2 networks, DAT balance sheets, collateralized DeFi positions, and long-term self-custody are flowing to destinations that have historically not enabled supply to return to exchanges.

“Emotions are heavy right now, but sentiment doesn’t dictate supply,” Milk Road wrote. “When this gap closes, the price follows.”

Beyond supply measurements, market technicians detect signals that buyers are taking control. Analyst Sykodelic highlighted that On Balance Volume (OBV) experienced a breakout above resistance late last week, although prices failed to follow.

They said the divergence was a classic sign of “latent purchasing power” that sometimes precedes upward moves.

“This is a sign of purchasing power and prices will usually follow,” the analyst said, cautioning that the indicators are not a guarantee.

They added that the overall price action “looks bullish,” suggesting that ETH could move higher again before a meaningful pullback.

Ether has remained above the $3,000 level for almost a week but it continues to face resistance near $3,200. Over the past 24 hours, ETH has consolidated around $3,050, reflecting the indecision of the broader market.

The ETH/BTC pair also attracted attention last week after breaking above a long-standing downtrend; Some investors see this move as an early sign that capital will return to Ethereum.

Meanwhile, BitMine Immersion Technologies, currently the largest institutional holder of Ether, continued to aggressively buy the dip even as leading investors braced for further declines.