Ethereum Exchange Reserves Shrink to Record Levels Since 2018

The Santiment data-gathering site recently provided interesting data about Ethereum, showing that the cryptocurrency has a lower selling pressure. According to the data, the percentage of the major cryptocurrency in exchanges reduced to record levels since 2018. However, its price is still doing great at $450 at the time of writing.

Reasons why ETH declines on exchanges

Observers and market analysts have pointed out two main reasons why Ethereum is declining on exchanges. First, it indicates that many ETH holders are not interested to sell their ETH holdings at the current price. Second, there is a high expectation for Ethereum’s growth as ETH 2.0 nears with an expected launch of the mainnet next month.

As a vital network upgrade, there is a high expectation for the upcoming ETH 2.0 as it increases the platform’s capacity to process transactions.

Presently, ETH blockchain can process about 15 transactions per second. But ETH 2.0 will skyrocket that number, making it possible to process over 3,000 transactions within a second, and even more than that in the future.

The Ethereum community knows it’s vital for the cryptocurrency to attain a faster transaction capacity since it handles decentralized applications, unlike Bitcoin. When there is an increase in user activities on decentralized applications, fees on ETH could increase to high levels, making it more difficult to send transactions.

And the concept of staking is taking center stage here, as it will lead to a reduction in the supply of exchanges.

The ETH upgrade will feature a process known as “staking”, allowing users to deposit 32 ETH on the platform and giving them the ability to process Ethereum transactions on the blockchain.

As a result, the users are entitled to a 15% return yearly from their holdings.

ETH2 inflows causing Ethereum in exchange reserve

Users who stake their 32ETH transfer the holdings to the ETH2 deposit address. To be eligible to receive the 15% return at the end of the year, they need to keep their stake. Sending or spending their holdings will disqualify them from receiving the return.

But before the ETH 2.0 will launch, deposits to Eth2 will have to reach 453, 733 ETH before Dec. 1. Presently, the deposits have reached 70,555 ETH. There have been steady inflows of ETH into the eth2 address, which has reduced the number of exchange reserves.

With the increased depreciation of ETH exchange reserves, Santiment analysts think there is a small chance that there would be large whale sale-off. As it stands, ETH is still maintaining its $450 level, which has seen heavy rejections in the past.