Ether (ETH) is potentially facing a supply squeeze as exchange balances reach levels not seen since 2015. This situation has prompted analysts to predict a possible surge in price should demand remain constant or increase.

Data from blockchain analytics firms like Glassnode and CryptoQuant indicate a significant decrease in the amount of Ether held on centralized exchanges. As of late this week, ETH exchange holdings stand at approximately 8.8% of the total supply, a stark contrast to Bitcoin's (BTC) 14.8%. The declining ETH supply on exchanges is attributed to several factors, most notably the increase in staking, decentralized finance (DeFi) participation, and long-term holding.

Factors Contributing to the Supply Squeeze

• Staking: A substantial amount of Ether is locked in staking contracts, reducing the available supply for trading. Over 28 million ETH, representing roughly 23% of the total circulating supply, is currently staked, yielding an average annualized return of 2.6%.
• DeFi: Ethereum is actively used within the DeFi ecosystem, further pulling Ether away from exchanges.
• Long-Term Holding: Investors are increasingly moving their Ether into cold storage or holding for the long term, rather than keeping it on exchanges for quick sale.
• Institutional Buying: Corporate treasuries and Exchange Traded Funds (ETFs) now hold a significant portion of the circulating ETH supply.
• Layer-2 activities: Ether is being absorbed into layer-2 activities, further reducing the available supply on exchanges.

Potential Market Impact

The reduction in Ether available on exchanges could lead to a supply squeeze, potentially driving prices upward. A similar situation occurred with Bitcoin earlier in 2025, when low exchange reserves were followed by a notable price increase. Analysts suggest that if demand for Ether increases or remains steady while supply diminishes, a significant price rally could occur.

Historical Context

Ethereum's exchange reserves have been declining since August 2020, from a peak of approximately 35.5 million ETH to around 16.8 million ETH recently. This sustained decline indicates a shift towards accumulation and long-term holding. Historically, similar patterns of decreasing exchange supply have preceded major bull cycles.

Analysts' Perspectives

Analysts note that the current market conditions are similar to those seen before previous price surges. Market strategist Ted Pillows suggests that if the upcoming Fusaka upgrade mirrors the impact of the Pectra upgrade earlier this year, ETH/USD could rally significantly. Sykodelic, an analyst, pointed out a breakout in the On-Balance Volume (OBV) indicator, suggesting hidden buying strength that could precede upward price movements.

Comparison with Bitcoin

The trend of decreasing Ether on exchanges contrasts with Bitcoin, which has a higher presence on exchanges. This divergence, coupled with increased network adoption and recent upgrades like Pectra and Fusaka, indicates that Ethereum could potentially outperform Bitcoin.

Factors to Consider

While the supply squeeze narrative is compelling, external factors such as macroeconomic conditions, regulatory developments, and overall investor sentiment will also play critical roles in determining future price movements.