Ethereum exchange balances fall to record lows

The Ethereum supply on exchanges has dropped to historic lows since 2016, as institutional and corporate demand for accumulation has expanded. The supply ratio shift indicates a change in holder behavior toward long-term retention, as opposed to retail short-term selling pressure. 

According to on-chain data provided by CryptoQuant analytics, the Exchange Supply Ratio (ESR), which measures the portion of all ETH held by exchange platforms, has decreased to approximately 0.137 across all exchanges. The drop marks the lowest since 2016 during the early development of the Ethereum blockchain. Across Binance, the largest crypto exchange platform by trading volume and with the highest ETH supply, the ESR has decreased to approximately 0.0325. 

ETH supply shift indicates diminished intent for immediate liquidation

According to the ESR figures provided by CryptoQuant analyst Arab Chain, there is a persistent net outflow of Ethereum tokens from exchanges to external or private wallets. The analysis by Arab Chain on CryptoQuant noted that such patterns often align with accumulation phases after a period of volatility, as markets absorb more liquidity with low selling pressure. 

Across all exchanges, the charts tracking the ESR metric show a persistent decline from mid-2024 to late 2025, fluctuating from approximately 0.165 steadily downwards to the current level of around 0.137. Meanwhile, the ETH price has also been fluctuating between $4,500 and its all-time high of $4,953.73 on August 24, 2025, to the current price of $2,830 based on CoinMarketCap data. 

Binance, the largest exchange by trading volume, has recorded a similar pattern, starting from 0.038 in mid-2024, to the current range of 0.032-0.0325. The Ethereum token price tends to follow a similar pattern, exhibiting a positive correlation between the ETH price and ESR.

The Ethereum blockchain’s transition to a Proof-of-Stake consensus mechanism has incentivized staking, allowing users to lock tokens and earn rewards. The consensus mechanism has attracted almost 36 million ETH currently staked and requiring transfer off exchanges towards dedicated wallets or protocols. The transition in consensus mechanisms has contributed to the acceleration of the decline in supply across all exchanges. 

Layer 2 ecosystems, such as Base, amplify the supply shift to DEXs

Risks associated with exchange failures, such as the 2022 FTX exchange collapse, have prompted the adoption of self-custody for enhanced security and control. Additionally, Layer 2 ecosystems, including Base, Arbitrum, and Optimism, have also attracted liquidity, further reducing the exchange-held supply. Layer 2 ecosystems on Ethereum offer scaling solutions that facilitate cheaper and faster transactions, pulling ETH supply from centralized exchanges (CEX) to decentralized exchanges (DEX). DEXs, such as PancakeSwap and Uniswap, have all been built on these protocols to facilitate direct P2P crypto trading. 

According to on-chain data, approximately 67 public companies, government entities, and institutions that hold ETH as part of a reserve strategy now hold roughly 6.71 million ETH, valued at around $19.02 billion. Additionally, Ethereum-focused ETFs hold approximately 6.22 million ETH, valued at $17.63 billion. These values represent 5.55% and 5.14%, respectively, of the total ETH supply.

The reduction in ETH supply across exchanges and rising institutional demand have created a low-liquidity, high-demand environment, leading to a supply squeeze. According to the Arab Chain analysis on CryptoQuant, increased selling pressure may have contributed to the ETH price drop; however, continued buying pressure, particularly from institutional investors, could drive the ETH price upward in the long term. 

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