Ethereum’s supply on exchanges has fallen to its lowest level since November 2015, with only 8.97 million ETH currently available.
Analysis reveals that this decline is primarily driven by the rising popularity of decentralized finance (DeFi) and staking mechanisms. As more holders are opting to lock up their assets, sell pressure on Ethereum has diminished. Over the past seven weeks, Ethereum’s exchange supply has plunged by 16.4%, signifying a long-term trend of accumulation.
However, this tightening supply hasn’t yet translated to a price boost for Ethereum. The cryptocurrency has experienced a staggering 47% drop from its December peak of $4,105 to a March 21 price of $1,990, positioning it as one of the underperformers among major cryptocurrencies.
On-chain analysis and technical indicators suggest that Ethereum may face further price declines. Analysts have revised their year-end price target for ETH from $10,000 to $4,000, citing escalating competition from other networks, particularly Ethereum layer-2 solutions.
Layer-2 networks are drawing users by offering lower fees, which, in turn, is reducing activity on the Ethereum mainnet. According to the latest data, Ethereum-based decentralized exchange (DEX) protocols processed a total volume of $9.8 billion in the past week, with significant contributions from Arbitrum and Base.
Monthly DEX volume on Ethereum has dropped sharply from $92 billion in December to $82 billion in February, with predictions of even lower figures in March. This decline in mainnet activity has also adversely affected Ethereum’s fee revenue, a crucial element of its economic model, plummeting from $218 million in December to a mere $46 million in February.
Despite the reduction in transaction costs following the Dencun upgrade—which cut gas fees by 95%—Ethereum’s revenue continues to decline. The total value locked in Ethereum has also seen a significant decrease, going from $76 billion in December to $46 billion.
A potential boost for Ethereum may arise from the staking of exchange-traded funds (ETFs). Requests have been made for approval from regulatory authorities to enable staking in Ethereum ETFs. However, institutional interest remains low, as evidenced by recent outflows of $370 million from Ethereum Spot ETFs.
Technically, Ethereum is facing downward pressure and resistance at $2,042. Current indicators suggest it is consolidating with low volatility. The Relative Strength Index (RSI) indicates ETH is recovering from oversold conditions but lacks strong momentum, currently sitting at 41.22. While volume remains weak, a slight increase indicates some accumulation.
Key price targets to watch include $2,163 and $2,370 if ETH can successfully break above $2,042. Conversely, if the $1,986 support level fails to hold, further declines toward $1,714—where previous buying interest has been noted—could be anticipated.
