Ethereum Exchange Balances Drop Below 10% as Market Sentiment Shifts, Bitcoin Holds Steady

• ETH exchange balance hits historic low of 9.985%, suggesting holders prefer DeFi or private wallets over exchanges.
• ETH sees sharper declines than BTC, but both cryptocurrencies recover midday, reflecting short-term volatility trends.
• Reduced ETH and BTC exchange balances hint at long-term holding and possible market supply shifts with future demand spikes.

On August 18, 2024, the Ethereum balance on exchanges dropped below 10% for the first time in history, signaling a notable shift in the market. This drop indicates that fewer holders are keeping their ETH on exchanges, which contrasts sharply with Bitcoin’s trend, where a higher percentage remains held on these platforms.

Steady Decline in Exchange Balances for Ethereum and Bitcoin

Over the past few years, Ethereum has seen a consistent decrease in the amount of its total supply held on exchanges. Currently, only around 9.985% of ETH remains on exchanges, compared to Bitcoin’s 15.289%. 

Source: LeonWaidmann on X

This trend, which began in 2017, reveals a growing preference among Ethereum holders to move their assets off exchanges, possibly into private wallets or decentralized finance (DeFi) protocols. For Bitcoin, a similar but less pronounced trend has been observed, with the percentage held on exchanges declining since its peak in 2020.

Impacts on Market Sentiment and Liquidity

The decreasing balances of both ETH and BTC on exchanges suggest a shift in market sentiment. Notably, Ethereum’s sharper reduction could be linked to increased staking activities and DeFi engagement. 

Additionally, Bitcoin’s more gradual reduction points to a cautious but steady movement away from exchanges, signaling that holders may be storing their assets elsewhere, potentially for long-term purposes. This reduced liquidity on exchanges can often influence supply dynamics, particularly if demand surges.

Price Volatility and Performance Differences

On August 19, both Ethereum and Bitcoin exhibited volatility throughout the day. Early in the morning, Ethereum experienced a sharp decline of approximately -3.5%, while Bitcoin remained relatively more stable, with a decline of around -2.5%. 

Source: CoinMarketCap

Both cryptocurrencies attempted to recover by the afternoon, though Bitcoin’s recovery was steadier than Ethereum’s, which faced more volatility. By the end of the day, Ethereum closed between -2% and -3%, while Bitcoin hovered between -1% and -2%.