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Highlights
- While on the surface “rising exchange balances” might sound like a positive thing for a cryptocurrency, it actually conveys the opposite.
- If the exchange balance is high, it means there is a lot of liquidity, meaning the value of the token is at the lower end.
- On November 8, ETH hit an all-time high of US$4,800. However, since then, the world’s second-largest crypto by market cap has suffered a steady decline to its current price of US$2,600 – a decrease of over 45%.
Ethereum investors are currently being kept on their toes. After a few tough months for the second-largest crypto, and the wider crypto market, Ethereum suffered more bad news today as news of its rising exchange balances was revealed.
According to a report, the Ethereum exchange balance is rising again and has touched a 3-month high after declining continuously through 2021.
While on the surface “rising exchange balances” might sound like a positive thing for a cryptocurrency, it actually conveys the opposite.
Let’s examine what it means for Ethereum and what exactly is causing the token’s recent struggles.
What are exchange balances?
In terms of crypto, an exchange balance refers to the amount of liquidity a particular crypto holds. If the exchange balance is at the lower end, it means that there is less liquidity of that particular coin because it’s all been bought up. This means a crypto with a low-exchange balance will be selling well and thus, the value of that crypto will be higher.
On the other hand, if the exchange balance is high, it means there is a lot of liquidity, meaning the token is witnessing selling pressure and investors are liquidating their holdings in a particular digital coin.
This is certainly the case with Ethereum at the moment, with its balance on exchanges reaching a three-month high of 14,715,388.749 ETH, according to on-chain reports.
Throughout last year, things were quite the opposite as Ethereum saw its balances on exchanges decline as the price continued to reach new heights.
On November 8, ETH hit an all-time high of US$4,800. Indeed, just a month later, Ethereum’s exchanges balance was 14 million ETH – which was a three-year low at that time.
However, since then, the world’s second-largest crypto by market cap has suffered a steady decline to its current price of US$2,600 – a decrease of over 45%.
What is adding to Ethereum’s woes?
Of course, Ethereum is not the only crypto under the gun at the moment. The wider crypto market is down, despite what looked like a comeback just last week.
On February 11, Bitcoin reached around US$45,000, raising hopes of Bitcoin enthusiasts who believe the recovery signalled an end to the token’s three-month decline. Last week, Bitcoin and the wider market received a reality check as the market saw a sharp drop.
The market’s woes are no doubt being heavily influenced by ongoing geopolitical tensions between Russia and Ukraine, the former of which is reportedly on the verge of a full-scale invasion of the latter.
Bottom Line
While uncertainty plagues not just the crypto market but the fate of Russia and Europe, it’s hard to know for certain where Ethereum will be in the near term.
While things may seem grim right now, there are a lot of good things on the horizon for Ethereum’s blockbuster, including its long-awaited upgrade due for release later this year. The long and short of it is: Ethereum’s long-term outlook looks good, even if this month doesn’t.
