Ethereum’s supply is decreasing at an unprecedented rate, as data indicates that over 40% of all Ether is currently locked out of circulation. Analysts are observing that the limited liquidity, an uptick in staking pool activity, and an insatiable institutional appetite are driving the world’s second-largest coin back up to record highs. Market data reveals that approximately 3.4% of Ethereum’s circulating supply is held by dormant addresses and decentralized autonomous treasuries, rendering those tokens illiquid for years or potentially indefinitely. Taylor noted that 7.3% is allocated to exchange-traded funds, with a significant portion remaining inactive for almost 80% of the time. Notably, approximately 29.5% of the total supply is currently staked within Ethereum’s proof-of-stake network.
The staked portion remains largely out of reach, hindered by the sluggish exit rate limit for validators, which is currently set at approximately 40 days. In total, these pools have effectively sidelined over 40% of the cryptocurrency’s total supply, setting the stage for a potential crunch in the upcoming months. According to stats Ethereum has yet to undergo a market cycle where all three supply vacuums are active at the same time. “This time, ETH enters the cycle with record institutional demand and the smallest liquid float in history. When demand meets a shrinking supply like this, price doesn’t just go up, it goes nuclear,” the long-term investor surmised. Data reveals that US-based exchange-traded funds have absorbed 6.84 million ETH, translating to roughly $28 billion, which constitutes about 5.6% of the total supply. This accumulation took place despite the absence of ETH staking approval in those ETFs. Public companies featured on Ark’s notice board are collectively in possession of more than 12% of the total ETH supply. Among them is Tom Lee’s Bitmine, which acquired $834 million in ETH earlier this week. The company currently possesses $12.52 billion in Ethereum, surpassing the halfway mark in its goal to command 5% of the total circulating supply, as reported by on-chain data platform Arkham Intelligence. Investor Ted Pillows backed Crypto Gucci’s optimistic outlook, indicating that Ethereum might be significantly undervalued in relation to macroeconomic indicators.
“$ETH is set to align with the M2 supply in Q4. The projected fair value of Ethereum is estimated to be between $8,000 and $10,000 by the first quarter of 2026. “With institutional bidding and staking approval, I think ETH will rally hard,” he wrote. Ethereum’s supply ratio on Binance dropped to 0.33 this week, nearing the lows last observed in May, after a brief period of buildup in tandem with ETH’s price stabilizing near $4,000. He noted that the drop in this ratio might indicate that investors are transferring assets off exchanges for long-term holdings or staking, which in turn diminishes selling pressure. From 2018 to 2021, the rise in the Binance supply ratio was a precursor to price correction phases, signaling an impending selloff. However, during periods of significant withdrawals, like the current situation, coins have seen notable upward price movements. In a recent observation, Arab Chain noted that the decline in exchange reserves may indicate that numerous holders are opting to store their Ethereum outside of centralized exchanges. This shift suggests a growing confidence in decentralized custody and staking solutions among investors.
Amid the prevailing bullish sentiment, certain traders on social media have labeled the “supply vacuum” theory as overhyped. “This supply narrative has been touted for over a year now,” one user remarked. “The price hasn’t broken and stayed above previous all-time highs but instead round-tripped to 2017 levels.” As of this report, Ethereum is hovering around the mid-$4,100 mark following a recovery from a dip that saw it fall to $3,900 on Friday. Technical analysts indicate that the current price structure appears to be somewhat bullish, provided that ETH remains above the $3,990 support zone.