Ethereum prices saw a strong 4% rally over the weekend, reaching a daily high of $3,839 on June 3, while shorts are at risk of more liquidations amid a reduction in ETH supply.
Ethereum started June 2024 up 4%.
After the Ethereum ETF was approved and triggered a 30% price rally, many ETH holders entered a profit-taking frenzy in the last week of May, reducing monthly gains to 24%.
However, the ETH market started to attract buying power in June as the wave of selling news subsided.
As shown in the yellow area in the above chart, the ETH price increased by 3.7% in the first three days of June. This move could set the stage for the rest of the month.
While the official launch of an Ethereum ETF remains unknown, Ethereum continues to struggle to find its next wave of demand growth. However, on-chain data shows that the decreasing supply of ETH tokens on exchanges has once again allowed bulls to take the lead.
Ethereum exchange supply drops dramatically
Cryptocurrency investors are awaiting the official launch of the recently approved Ethereum ETF. Institutional investors in the United States, including pension funds, investment firms, hedge funds, etc., are expected to add billions of dollars worth of ETH to their portfolios in the coming weeks.
Recent transfers of Ethereum tokens between exchanges show that existing ETH holders have begun taking bullish actions to preemptively enjoy the positive impact of ETF inflows.
This is importantly corroborated by Cryptoquant’s exchange reserves chart, which shows real-time changes in ETH balances held in exchange custodial wallets and trading platforms.
The supply of ETH deposits has dropped significantly since May 21st. The above chart shows that as of June 3, 2024, investors held 13.9 million ETH on exchanges. But at the time of writing, Ethereum exchange supply has dropped to 13.1 million ETH.
This means that in the 14 trading days between May 21 and June 3, 2024, Ethereum holders have moved more than 800,000 ETH from exchanges to long-term storage options and staking contracts.
When exchange supply drops dramatically, this creates a bullish vibe for the underlying asset for two reasons. First, it means that existing investors are looking to earn long-term gains rather than taking advantage of short-term trading opportunities on the exchange.
More importantly, this 800,000 ETH exchange outflow means that over $3 billion worth of ETH has been removed from short-term market supply in the past two weeks alone.
This puts the price of Ethereum in an ideal position to break through $4,200 during the next wave of demand growth.
In addition to ETF inflows, the U.S. non-farm payrolls report scheduled for release on June 7, 2024 is another important market event that could influence Ethereum price action.
Disclaimer: This content is for informational purposes only and should not be considered financial advice. The opinions expressed in this article may contain the personal opinions of the author and do not reflect the views of The Crypto Basic. Readers are encouraged to perform thorough research before making any investment decisions. The Crypto Basic is not responsible for any financial losses.
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