Over the past week, the Ethereum (ETH) cryptocurrency has witnessed a significant outflow from centralized exchanges, exceeding $380 million, as reported by blockchain analytics firm IntoTheBlock. Such a massive outflow of exchange-held ETH indicates an increasing trend of investor accumulation into self-custody, which could potentially signify a tightening supply narrative that has often been a precursor to price rallies.
Despite the ongoing price volatility, Ethereum’s net flows from exchanges from April 24 through May 1 were consistently negative. A particularly significant outflow was recorded on April 26, suggesting that investors capitalized on short-term price dips to purchase and withdraw ETH into self-custody. Despite the price fluctuations throughout the week, ETH concluded the period on a high note, rebounding to over $1,840. Analysts interpret this sustained outflow from exchanges as a bullish sign since a reduction in supply on exchanges minimizes the risk of sell pressure and could pave the way for a breakout if demand escalates.
Recent data from CryptoQuant further supports this trend, indicating that the distribution of Ethereum supply by wallet size suggests that the largest holders are either holding onto their positions or continuing to accumulate. CryptoQuant analyst Darkost noted that wallets holding more than 100,000 ETH have grown by approximately 3% since August 2024. He interprets this as “smart money” positioning. He also pointed out that the amount of ETH held by large wallets had been gradually decreasing since 2020, but this trend now seems to be reversing.
In addition to the above, Darkost observed a steady number of active addresses despite ETH’s price decline. He noted significant selling pressure in the derivatives market, which may be easing. Importantly, the Net Taker Volume turned positive on April 23 and 24, potentially signaling the start of a bottoming process if the trend persists.
Contrary to the “Ethereum is dead” narrative, Darkost emphasized that despite ETH currently trading around 62% below its 2021 all-time high, on-chain data indicates enduring strength and strategic accumulation. However, he also pointed out that open interest has dropped significantly and that trading volumes remain subdued, both of which underline the prevailing cautious market sentiment.
In Darkost’s opinion, the most sensible approach at this time might be to wait for a clear invalidation of the bearish trend or, at most, to implement a light dollar-cost averaging (DCA) strategy. This is, of course, subject to individual investor risk tolerance and investment goals. As always, investors are advised to conduct their own research and seek professional advice before making any investment decisions.
