Confidence In Ethereum: Exchange-Held ETH Reaches An All-Time Low

The second-largest cryptocurrency in the world by market capitalization, Ethereum, has accomplished a new milestone in terms of self-custody. The amount of Ethereum kept in self-custody and away from exchanges has reportedly reached an all-time high, according to statistics from Santiment, signaling a major rise in hodler trust.

The fact that Ethereum's market share on exchanges is currently at an all-time low of 10.31% shows that investors are increasingly choosing to keep their Ethereum rather than trade it on exchanges. Given that Ethereum was created almost 8 years ago, this metric represents the highest level of self-custody the coin has ever experienced.

The general market perception of Ethereum is also reflecting this trend, remaining favorable despite recent market turmoil, and many investors are still holding onto their ETH, anticipating further price gains. This demonstrates unequivocal faith in Ethereum's long-term potential as a worthwhile investment.

Why is Ethereum's self-custody skyrocketing?

This rise in self-custody could be due to a number of factors. Decentralized finance (DeFi) services, which enable users to lend, borrow, and trade Ethereum without the use of intermediaries like exchanges, are becoming more and more popular, which causes an uptick in keeping ETH off platforms. Also, the recent FTX crash highlighted the dangers of keeping cryptocurrencies on centralized exchanges, which have recently been the target of multiple high-profile thefts and security breaches.

The popularity of the Ethereum network itself is another possible factor contributing to this rising confidence. Ethereum has made a name for itself as the top decentralized application (dApp) platform, allowing developers to build a wide range of cutting-edge and useful applications on top of its blockchain.

Whatever the motivation behind the all-time low in exchange-held ETH, it is a good indicator of the overall health of the Ethereum ecosystem that the second-largest crypto to date is now kept in self-custody at an all-time high. The coin thus becomes less susceptible to market volatility and manipulation as more investors decide to keep their Ethereum instead of exchanging it on exchanges.

As a result, both investors and hodlers of Ethereum benefit from a more stable and long-lasting ecosystem.

Thunders in paradise for Ethereum?

Despite the milestone for the Ethereum ecosystem, recent weeks have seen a minor fall in Ethereum staking deposits as a result of growing regulatory pressure and the April 12 Shapella upgrade.

According to data from Glassnode, the current low level of deposit activity is "caused by regulatory pressure and the Shanghai upgrade."

Another reason for the dip is that in 2023 American financial regulators have been harshly cracking down on cryptocurrencies like Ethereum. Despite the fact that there is no official law from Congress defining Ethereum as a security, the Securities and Exchange Commission is sure that it is one and has begun a war on staking. Following a series of lawsuits against crypto exchanges for offering staking services in February, Coinbase’s CEO Brian Armstrong raised a voice of concern about how U.S. legislators are handling such services.

“I hope that’s not the case as I believe it would be a terrible path for the U.S. if that was allowed to happen,” Armstrong commented, adding that staking is actually bringing a vast array of improvements to the crypto ecosystem, increased security, and reduced carbon footprints.

“Shanghai” to unlock staked ETH on the Beacon Chain

On April 12, the Ethereum network will get a long-awaited upgrade. ETH staked on the Beacon Chain will be released gradually thanks to the Shapella hard fork, commonly referred to as the Shanghai hard fork. The hard fork may result in large quantities of Ethereum entering circulation, acting as an inflationary pressure point for ETH.

According to Glassnode, the upgrade and the regulatory crackdown are the two reasons behind the decrease in Ethereum staking deposits. The company also pointed out that significant centralized exchanges like Coinbase, Binance, and Kraken had significantly lost market share to Lido's liquid staking platform.