If you store your coins in exchanges, you have probably thought about the security that represents that platform and as well as you many more people. But a curious thing happened with Ethereum (ETH) exchange reserves, which have now reached a new low for the first time in more than two years. Will this have to do with security concerns, or is there something else? Find out.
This seems to go in conjunction with the rise in the price of Ethereum. Over the months, as the price of ETH has gone up, reserves on exchanges have continuously gone down. Exchange reserves are the supply available for sale, the purchase of altcoins and margin trading on exchanges. Now there is less and less of this amount of Ethereum available on such platforms.
Specifically, according to CryptoQuant data, this number has plummeted from 26 million in June last year to less than 21 million in July 2021.
A little context about Ethereum and its demand
With ETH 2.0, only 32 Ethereum coins are needed to be able to run your own node and be a validator. Faced with this, more and more investors are choosing to stake themselves. This method is meant to be more secure, as you have access to your own private keys while staking.
Why? Simple. With the announcement of ETH 2.0 investors can stake their coins and make a profit on them. Ethereum’s move from proof-of-work to proof-of-stake meant that the network would not need validators. Validators are the means to confirm transactions in a proof-of-stake network. This means that people could conveniently run their own node.
This has meant that users now take their ETH out of exchanges and put it into their own private wallets. As long as they have enough coins, they can set up their own nodes and can bet their ETH on their own terms.
For this reason, only those with smaller amounts of ETH keep their tokens on exchanges, and with good reason. As a result, exchanges collectively lost more than 5 million ETH from their reserves in one year. And this number is expected to likely continue as more investors come into play.
What other factors may be influencing this decline in ETH reserves on exchanges?
Although we can’t ask an individual question to every ETH investor, or to every person who keeps their tokens on exchanges, we can get an idea. There is a popular saying among crypto investors.
In the past, the security of certain exchanges has been seriously compromised, and so there may still be some mistrust. After all, when you have your tokens on an exchange, you don’t really have 100% control over them.
Obviously, this influences that long-term holders do not leave their tokens on exchanges. As more people understand how the market works, they will understand the best way to store their tokens. And this would be for many to put in a wallet where you control the keys.
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