Ether (ETH), the second-largest cryptocurrency by market capitalization, has seen a constant decline in the exchange supply over the past six months post-Merge. Ethereum network went under a major network upgrade in September last year, moving from a proof-of-work (PoW) to a proof-of-stake (PoS) network and the event was called the Merge.
According to on-chain data shared by the crypto analytic group Santiment, the amount of available ETH sitting on exchanges continues to fall. Since the Merge, there is 37% fewer ETH on exchanges. A constant decline in supply on exchanges is considered a bullish sign as there is less ETH available to trade or sell.
There were a total of 19.12 million ETH worth $31.3 billion on exchanges in September before the Merge. The number has now declined to 13.36 million ETH worth $19.7 billion in the second week of February.
Ethereum supply on exchanges. Source: Santiment
A major chunk of the ETH supply is being moved into self custody while many traders also prefer staking with the Shanghai upgrade just around the corner. Shanghai, Ethereum’s upcoming significant update, is scheduled to launch in March. The Shanghai hard fork will integrate more improvement proposals for network enhancements and allow stakers and validators to withdraw their holdings from the Beacon Chain.
Currently, 16 million ETH, or 14% of the total supply, are staked in the Beacon chain. At the current price of ETH, it amounts to approximately $25 billion, a sizable amount that will gradually become liquid after the Shanghai hard fork.
Related: What’s in and what’s out for Ethereum’s Shanghai upgrade
Apart from a constant decline in ETH supply held on exchanges, the overall market supply of ETH has also seen a decline ever since it turned deflationary post-London upgrade. The deflationary model comes from a fee-burning mechanism introduced through Ethereum Improvement Proposal (EIP)-1559.
Ethereum burn rate. Source: Beacon chain
A total of 2.9 million ETH has been burned since the London upgrade in August 2021, estimated to be worth $4,5 billion in today’s value.