Ether Reserves Plummet to Nine-Year Low, Signaling Potential Market Bottom

Ether reserves on centralized exchanges have reached an almost nine-year low, with a total of 18.95 million ETH held on Feb. 18, according to CryptoQuant data. This marks the lowest level since July 2016 when Ether was trading around $14. The diminishing supply of Ether on exchanges signals a potential market bottom and a possible recovery towards the $3,000 psychological mark.

The decrease in Ether supply on exchanges may indicate an incoming price rally driven by a "supply shock." This occurs when strong buyer demand meets decreasing available ETH, leading to price appreciation. However, Ether has struggled to gain momentum over the past year, falling over 3.67% on the yearly chart and declining over 19% year-to-date (YTD).

Ether moving off exchanges is a "bullish" signal, suggesting investors are moving their ETH into cold storage wallets for long-term holding. Nicolai Sondergaard, research analyst at Nansen crypto intelligence platform, confirms this trend, stating that similar trends are observed for BTC. He believes that this shift could be due to demand outpacing supply or a natural shift towards self-custody and cold storage.

Despite the positive signals, Ether faces significant resistance at $2,750 and $2,800. A potential rally above $2,800 would liquidate over $822 million worth of leveraged short liquidations across all exchanges, according to CoinGlass data.

The potential introduction of staking for Ether exchange-traded funds (ETFs) may also be a catalyst for ETH price. Marcin Kazmierczak, co-founder and chief operating officer at Redstone, believes that the introduction of staking ETFs could further tighten Ethereum's liquid supply and reinforce its value proposition as a prime investment asset. Consensys founder Joe Lubin is also expecting regulatory approval for staking.