Ethereum had seen its balances on exchanges decline through 2021. This happened despite continued market rallies that propelled the digital asset to all-time highs. Investors had been hoarding throughout the bull rallies instead of trying to get rid of their coins, leading to reduced supply on centralized exchanges. This was also propelled by the growing popularity of DeFi. However, this trend is beginning to reverse as foreign exchange balances are now on the rise.
Ethereum Exchange Balances Hit 3-Month High
New on-chain reports have shown that Ethereum exchange balances are on the rise again. After hitting one-year lows in 2021, currency inflows have started to recover, seeing balances hit three-month highs.
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Data from Glassnode shows that number is down more than 700,000 ETH from its December lows. This metric which has been inversely correlated with the price of the digital asset has continued into the new year. While exchange balances had fallen as the cryptocurrency saw its price soar, the same balances are rising with the current downtrend.
š #Ethereum $ETH The balance on exchanges just hit a 3-month high of 14,715,388.749 ETH
The previous 3-month high of 14,714,748.847 ETH was observed on February 21, 2022
View metric: https://t.co/1dCpD2ey8E pic.twitter.com/TQHqaM3OOi
ā glassnode alerts (@glassnodealerts) February 22, 2022
With Ethereum’s continued decline, investors are beginning to sell their holdings to avoid losses. This resulted in large inflows into the stock exchanges. On February 21, the number of ETH remaining on exchanges reached 14,714,748.847. If the trend continues, more ETH could end up on centralized exchanges, which are more likely to be sold off by investors after a long period of accumulation.
How ETH reacted
Ethereum reacted as expected to this new metric. In cases where centralized exchange balances are falling, this signals that investors are not ready to sell, hence the value is rising. However, once investors start moving their holdings to exchanges, it shows that they are ready to sell, and the sell-off will negatively affect the price of the digital asset.
ETH trading above $2,600 | Source: ETHUSD on TradingView.com
With the recent decline, Ethereum slipped below its 100-day simple moving average to trade at six-month lows. This means that investors are less willing to buy the digital asset at the prices they have had over the past two months.
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Sentiment also tilted heavily towards the sell side with a 72% majority. The cryptocurrency is also showing strong selling sentiments on the short-, medium-, and long-term indicators, which means the selling is likely to continue.
The next resistance point for the digital asset lists at $2,748 but with the current trajectory, it is more likely that ETH will touch its 1st level of support at $2,496 before reversing to test that point. resistance. However, the crypto is still unpredictable and ETH could very well start another recovery trend before touching below $2,500.
Featured image from News18, chart from TradingView.com
