The amount of ether tied in the smart contract increases sharply when foreign exchange reserves decrease – will the price increase?

Before EIP-1559 was triggered, two trends dominated the ether supply dynamic.

The supply of Ether on centralized exchanges is currently falling steadily to the level of the last time in 2018. Where are the holders moving their Ether?

Selling pressure on ether decreases

Ether owners are actively withdrawing their funds from centralized exchanges, according to data from on-chain data provider Glassnode.

Source: Glassnode

This trend has been in place for 12 consecutive months. For the first time, ether balances on exchanges began to decline in July 2020. At this point, the price of Ether was around $ 200-300.

The upward trend in the amount of ether on centralized exchanges prevailed between March 2018 and March 2020. The net amount of ether on the exchanges stabilized on the money market after Black Friday.

Because of this ongoing withdrawal pressure, the amount of Ether stored in Exchange wallets is close to levels not seen since the end of the fourth quarter of 2018.

Holders are taking a break from EIP-1559. upgrade

At the same time, the supply of ether that is included in smart contracts is increasing. For the first time in the six-year history of the Ethereum network, this indicator exceeded 26%.

Source: Glassnode

The index started booming during the DeFi Craze from Q2-3 2020. In addition, it has been growing since January 2021.

Both processes are catalyzed by the upcoming activation of EIP-1559. As a result of this release, ether becomes a deflationary asset.

At press time, the ETH price is trading at 1887, down over 4% in the last 24 hours, with trading volume down more than 12% to $ 12.6 billion. So far, the above steps have had no concrete impact on the price of the second largest cryptocurrency.

Source: TradingView

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