Ethereum Supply Squeeze Ignites Bullish Momentum as Network Expands Horizons

Ethereum's supply is tightening—and the market is taking notice.

The Great Burn Accelerates

The merge did more than just switch off the energy-guzzling miners. It activated a permanent deflationary engine. With every transaction settled, a portion of ETH gets sent to an unreachable address, vanishing from circulation forever. This isn't just a technical tweak; it's a fundamental rewrite of the asset's monetary policy, applying a slow, constant pressure to available supply.

Demand Levers Get Pulled

While supply shrinks, the avenues for locking ETH up are multiplying. Staking for network security continues to soak up tokens, turning them into productive, yield-bearing assets instead of idle balances. Meanwhile, layer-2 ecosystems are booming, but they still ultimately settle on Ethereum—fueling more fee burn and reinforcing the base layer's value capture. It's a virtuous cycle that traditional finance would kill for, if only their spreadsheets could comprehend it.

New Frontiers, Same Foundation

The narrative is evolving beyond just 'digital oil.' Real-world asset tokenization is moving from powerpoint slides to mainnet, with institutions experimenting on Ethereum's battle-tested rails. Decentralized social media and AI inference markets are emerging as the next wave of adoption, all demanding the network's unique blend of security and credibly neutral settlement.

The math is getting simple. Shrinking supply meets expanding utility. For the skeptics still waiting for their 'aha' moment? Don't worry—your bank's 0.01% savings account will still be there when you're ready.

Ethereum$3,149 has been witnessing significant withdrawals from exchanges recently, and new data suggests an increasing scarcity in the circulating supply of ETH, which has reignited discussions in the crypto market. According to Glassnode and CryptoQuant, only 8.84% of ETH is held on exchanges, compared to Bitcoin’s 14.8%. This means that the supply of ETH on exchanges has reached almost half of that of BTC.

Staking and DeFi: A New Home for Ethereum

Leon Waidmann, Head of Research at Onchain Foundation, identifies staking as the primary reason for the reduction in ETH on exchanges. Millions of ETH are locked in staking contracts on the ethereum network. DeFi applications further compound this effect as users prefer to engage in liquidity pools and collateral mechanisms rather than holding their ETH on exchanges.

Lucca Rassele from MPM Labs highlights that ETH/BTC comparisons can be misleading since these assets serve fundamentally different functions. However, Derek Little, CEO of Innovative App World, attributes ETH’s withdrawal from exchanges directly to its usage: “The era of HYPE is over; the main topic in crypto is interoperability.”

Furthermore, Glassnode data supports this view. November statistics indicate that ETH investors are more active, selling, and spending compared to BTC investors. The Ethereum network’s operation of numerous applications demands ETH as a gas fee, contributing to its active consumption.

In contrast, Bitcoin$92,384 investors treat it more like “digital gold”; over 61% of BTC supply has remained stationary for more than a year, affirming this approach.

Growing Institutional Demand: A New Dynamic for ETH

Another crucial reason for ETH’s departure from exchanges is the rising institutional demand. Approximately 25% of ETH’s supply is locked in ETFs and local staking structures, reinforcing its role both as a utility and a store of value. On the DeFi side, a similar scenario unfolds as 16% of Ethereum supply is actively used in liquid staking protocols and collateral structures. Glassnode emphasizes ETH’s rare dual function as a reserve asset and a cornerstone of DeFi.

ETFs and institutional investment products are accelerating ETH withdrawals. ETFs currently hold 5.24% of ETH supply, while DATs hold 4.9%. Throughout the year, the increasing appetite from these entities has notably reduced the balance of ETH on exchanges.

Supporting this trend, CoinShares recently reported an inflow of over $170 million into institutional investment products, with a significant portion involving Ethereum. Analysts suggest that this wave will play a crucial role in determining future ETH price movements.