Whatever happened to the $1.6B of Ethereum drained from exchanges?
Several abundant whales have been detected in the waters of the Ethereum blockchain.
The Ethereum balance on top-tier crypto exchanges reached a 15-month low of 15.4M ETH (amounting to $20.5B), according to a tweet from crypto analytics team Glassnode last Saturday, January 23.
The evacuation started last Tuesday when there was 16.6M ETH held in exchanges, which means that $1.6B has left the exchanges. The Whale Alert Twitter account, a bot that tracks down large crypto transactions, has reported that much of it has shifted from major crypto exchanges to anonymous wallets.
What is the reason behind this ETH exodus? An analyst from Quantum Economics, Pedro Febrero, stated that there could be three reasons that explain why so much ETH has been drained from exchanges.
First of all, “Ethereum has returned to being locked in DeFi,” he said, referring to crypto staked in decentralized finance smart contracts. DeFi refers to the budding industry of decentralized lending protocols, exchanges, and synthetic derivative protocols.
But this doesn’t check out. DeFi Pulse stated that the amount of ETH locked in DeFi Pulse, the amount of ETH locked in DeFi had actually decreased from 7M ETH on Tuesday to 6.9M the next day, and then went back again to 7M. This explains the 0.1M ETH, believing that DeFi’s pulse data is correct and the other 0.1M ETH game from these exchanges. Now, what about the rest?
Febrero’s next best guess: “The number of ETH locked in the beacon chain (PoS) grew by more than 320% since December 2020.” Here, Febrero is talking about ETH locked up in the smart contracts for ETH2.0, the next generation upgrade to the Ethereum blockchain. People involve money in ETH2.0 to protect the network and earn staking rewards on their deposits.
Now the stats are checking out. Last January 19, 170,000 ETH was staked in ETH2.0, and then another 200,000 ETH on Wednesday. It could account for about ⅓ of the missing ETH, but not all of them. Then while ETH2.0 stakers had cooled off by Tuesday, ETH has kept on draining.
The third thought, “Institutional investors and smart money, like Grayscale investors, are accumulating Ethereum,” he stated. But according to metrics site BYBT, Grayscale hasn’t been buying any more ETH for its publicly-traded trusts. So where’s all the ETH going? Private investors, HODLers, and investors may explain the locations of the rest of the mystery coins.
Nevertheless, the ETH’s locations are of subsidiary importance because it has left exchanges, Febrero emphasized.
“In our opinion, we think this means the price of ether has a greater chance of moving up. The less ether is available at exchanges, the more likely is the price to rise,” he said.
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