After the hack on Binance on October 29th, the supply of Ethereum exchanges has been contracting, but on-chain data suggests that there may be more interesting underlying factors at play. The holding of ETH by exchanges has seen a two-stage decline, which may reflect a contraction in liquidity, rather than just a small-scale outflow triggered by panic.
According to TRM Labs, hackers transferred approximately 200,630 ETH from the hot wallet of Binance.
The balance did not immediately decline; on October 29th, the balance of ETH at one of the major exchange addresses actually increased by about 39,000 units. A larger decline followed. With the resumption of withdrawals, these addresses saw a total reduction of about 313,000 ETH units on November 1st and November 2nd.
The addresses of major exchanges decreased by approximately 297,000 ETH from October 28th to November 2nd, representing a decline of 5.4%, which indicates a significant reduction in liquidity.
It doesn't necessarily mean hoarding.
A decrease in exchange balances does not necessarily mean that funds are being hoarded. The relevant tokens may be transferred to cold wallets, moved between different wallets, or sent to other exchanges. It is impossible to determine where these coins ultimately go based solely on exchange address data.
As of now, the price of Ethereum remains weak. On the daily chart ETH / USD, the trading price is close to $2,264, which is below several key moving averages. This price has fallen from a high of around $2,800 in October.
On the chart, it is clear to see selling pressure, and the range between $2,300 and $2,400 may constitute a resistance level. If the price can effectively hold above this level, it would indicate an improvement in market sentiment. However, if buyers fail to hold the $2,200 area, Ethereum could continue to fall.
At present, the current decline in supply seems more like a transfer of liquidity rather than a confirmed supply shock, especially on large exchanges like Binance.
What's more important is whether the disappeared ETH has truly left the trading circulation, or if it has just moved to another place. It's still too early to consider a decrease in supply from exchanges as a bullish signal before the market capital flow has calmed down a bit.
