Investors have been rapidly pulling their ETH out of exchanges, signaling they expect Ethereum’s native cryptocurrency to rally in the coming months.

Investors have pulled over 4.1 million ETH, or $40.21 billion from exchanges in the last 10 days. This mass withdrawal, which amounts to roughly 3.3% of the total circulating supply, has driven ETH exchange balances to dip below 12 million ETH, the lowest level since March 2016, according to data from Glassnode.

Ryan Lee, Chief Analyst at Bitget Research, points to the anticipation surrounding the Ethereum ETF as a critical factor.

“Both retail and institutional investors believe [the spot ETH ETF] approval will trigger massive demand for Ethereum,” Lee said in an interview. “This explains the proactive accumulation of over 4.1 million Ethereum on trading platforms — a trend I don’t expect to slow down until months after the S-1 registrations are approved.”

On May 24, the U.S. Securities and Exchange Commission greenlit the trading of eight exchange-traded funds backed by spot Ether, including the Grayscale Ethereum Trust, the Bitwise Ethereum ETF, and BlackRock’s iShares Ethereum Trust. After approving the issuers 19b-4 forms, the agency still has to approve their S-1 forms for the products to start trading.

On June 13, SEC Chair Gary Gensler testified that the approval of an Ethereum spot ETF could come as early as this summer.

The Steep Decline in Exchange Balances

ETH balances on exchanges have plunged to below 12 million from their peak of 33 million in 2020, Glassnode data shows.

On Binance alone, the ETH balance in May peaked at 4 million but dropped to 3.8 million within two weeks, with over 200,000 ETH taken off the platform. Meanwhile, more than 300,000 ETH left Coinbase since May. This is only the fifth time more than 150,000 ETH has been withdrawn from the exchange.

“These large transactions (made in a single day) range between $400 million and $1.1 billion each,” said CryptoQuant analyst Burak Kesmeci. “It’s highly likely that these Ethereum withdrawals are driven by whales.”

Meanwhile, Lee suggests that this movement of ETH away from exchanges might indicate a strategy to hold on to their assets.

“Large holders are also buying ETH through spot trading on exchanges and then transferring them to on-chain wallets, awaiting further price increases,” he explained.

Ethereum vs Bitcoin Supply

In contrast to Ethereum, Bitcoin’s supply on exchanges has risen to 3 million BTC from 2.67 million BTC in May.

On-chain data reveals a decline in the number of new active addresses for both Bitcoin and Ethereum. Ethereum’s new active addresses dropped by 10% in May to 467,720 addresses while Bitcoin saw a decline of 27%, bringing the total down to 252,470.

In May, blockchain data from Nansen Intelligence showed that net inflows to exchanges on May 22 reached 81,840 ETH, worth roughly $306 million — the highest amount recorded in a single day since January 23.

Implications for Price Stability

Analysts believe that the reduction in ETH liquidity on exchanges could potentially affect its price stability in the short term.

Leon Waidmann, an on-chain analyst at BTC Echo, said investors are “filling their long-term ETH bags.”

“It’s becoming increasingly plausible that Ethereum could lead the upcoming crypto rally,” he said.

Lee argues that as ETH supplies on exchanges decrease, prospective spot ETF issuers looking to acquire Ethereum to back fund subscriptions might find their options limited.

“This factor could influence market sentiment and potentially push prices back up to $4,800 over the long term,” he noted.