- Ethereum network moved to proof-of-stake (PoS) in September 2022, resulting in a 37% decrease in Ether held on exchanges compared to pre-Merge levels.
- Traders are increasingly turning towards self-custody and staking ahead of the upcoming Shanghai upgrade scheduled for March 2023.
- Ethereum adopted a deflationary model post London upgrade, burning 2.9 million ETH with an estimated value of $4.5 billion, strengthening its reliability as one of the major blockchain platforms for decentralized applications (dApps).
The exchange supply of Ether had fallen significantly since the September 2022 Merge upgrade, when the Ethereum network moved from proof-of-work (PoW) to proof-of-stake (PoS). According to on-chain data shared by crypto analytics firm Santiment, 37% fewer Ether are now held on exchanges compared to pre-Merge levels. The amount of available ETH sitting on exchanges has declined to 13.36 million ETH, worth $19.7 billion in February 2021.
Self-custody is increasingly becoming popular amongst traders, while many also opt for staking as the Shanghai upgrade is scheduled for March. Sixteen million ETH – 14% of the total supply – is currently staked on the Beacon Chain, equivalent to approximately $25 billion at today’s prices. After Shanghai’s hard fork completion, these holdings will become liquid and can be withdrawn from the chain.
Additionally, Ethereum adopted a deflationary model post-London upgrade in August 2021 through Ethereum Improvement Proposal (EIP)-1559 fee-burn mechanism; thus far, 2.9 million ETH have been burned with an estimated value of $4.5 billion per current price. This development points toward increasing confidence in Ethereum’s reliability and security as one of the major blockchain platforms for operating decentralized applications (dApps).
The Ethereum Merge is an upgrade to the Ethereum network that took place on September 2, 2022. The upgrade moved the Ethereum network from proof-of-work (PoW) to proof-of-stake (PoS), allowing for improved scalability and network performance. As a result of this transition, Ethereum has become more accessible for users and developers.
With this transition, users can access Ethereum services much more efficiently, allowing developers to create decentralized applications powered by the Ethereum blockchain.
Speculations on Supply Decrease
The decrease in Ether held on exchanges before the Ethereum Merge can be attributed to several factors. Firstly, users may have withdrawn their tokens in anticipation of the Merge and saved them off-exchange. Secondly, traders may have sold their tokens as they had potentially expected a drastic price movement due to the change in the consensus mechanism. Finally, improved scalability of the Ethereum network could’ve made it much easier for users to move funds from exchange wallets to private wallets and vice versa – thereby decreasing the amount of Ether held on exchanges.
Whatever it may be, ETH still stands firm in the crypto market. It may have fallen from the all-time high of almost $5,000 to its current zone of $1,500 to $1,700, but Ether remains the “silver” of cryptocurrency.