Ethereum reserves on central exchanges continue their downward trend which began earlier this year. According to blockchain analysis platform Glassnode, ETH balances on cryptocurrency exchanges hit a three-year low of 14,042,589.584 ETH.
With the prices of ETH displaying a bullish sentiment, the total amount of ETH stored on central exchanges has declined to a new three-year low, just as its prices surged above $4000.
ETH On Exchanges Hits Three-Year Low
According to the data acquired from Glassnode, Ethereum reserves on central exchanges have fallen to a three-year low.
The chart displayed exhibits a downward trend of ETH balances since January 2021, with its balance on exchanges dropping to a low of 14 million.
Meanwhile, the prices of ETH tokens have maintained a bullish trend in the same period. Its price surged to $4192, suggesting an inverse correlation between Ethereum's price and the balance stored on central exchanges.
Possible factors contributing to the downfall
The downward trend of ETH reserves on central exchanges indicates the trader's approach to holding the underlying asset rather than trading it on a central exchange. This may be one of the key reasons prompting the decline of ETH reserves on the exchanges.
In the battle of cryptocurrency wallets vs exchanges, many holders opt to move their assets away from exchanges. Here, they often repeat the mantra of "Not your keys, not your crypto." This has become especially prominent in light of recent exchange hacks, with Bitmart losing almost $200m last week.
Another contributing factor driving the downward trend of ETH stored on exchanges is the rise of Decentralized Finance or DeFi.
Investors are deploying ETH tokens earned via exchanges into decentralized platforms to earn passive income.
Facilities offered by DEX platforms such as yield farming and staking have become mainstream due to increased user interest and boosted trading activities. These may have contributed to the decline.
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