As the price of Ethereum approaches new all-time highs, the coin’s supply shock appears to be worsening as foreign exchange reserves have fallen 18% in the past five months.
Ethereum’s swap reserves have fallen by 18% in the past 5 months
As a CryptoQuant article pointed out, ETH’s foreign exchange reserves appear to have declined significantly in recent months, signaling that a supply shock could be brewing in crypto.
All Exchanges Reserve is an indicator that shows the total amount of Ethereum present in the wallets of all exchanges.
An increase in the value of the metric means that investors move their coins to exchanges for the purpose of selling, thus increasing the available supply of the crypto. Such a trend could be bearish for ETH.
A decrease, on the other hand, would involve holders removing their Ethereum from their personal wallets, either to keep them or to sell them through over-the-counter agreements. This trend may prove to be bullish for crypto.
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Now here is a chart that highlights the trend in the value of the indicator during this year:
ETH's exchange reserves seem to be on a constant decline | Source: ETHUSD on TradingVIew
As the chart above shows, the value of the indicator has been showing a steady decline for some time now. In the last five months alone, the reserve has declined by 18%.
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Incidentally, 5 months ago the crypto broke above $ 4000 for the first time. The foreign exchange reserve stood at around 22 million ETH at the time. Since then, the coin has broken an additional $ 4,000 twice, and each time the reserve has been less. Today the value of the indicator is only 18 million ETH.
This trend shows that the demand for Ethereum has been quite different each time the coin has approached its ATH. Since foreign exchange reserves are very low at the moment, the usual supply and demand dynamics tell us that such a supply shock could help propel the coin’s price soon.
As of this writing, the price of Ethereum is floating around $ 4.4,000, up 11% over the past seven days. Over the past month, the crypto has gained 54% in value.
The chart below shows the ETH price trend over the past five days.
Ethereum's price recovers from the crash and is now heading towards a new ATH | Source: ETHUSD on TradingView
ETH has shown some volatility over the past few days as the coin’s price slumped to $ 3.9k a few days ago, but has already rallied higher. If the supply is sufficient, the coin could soon be ready to launch and explore new ATHs.
Featured image from Unsplash.com, charts from CryptoQuant.com, TradingView.com