Increasing institutional investor participation in the crypto space and attractive investment opportunities in Decentralised Finance (DeFi) are driving Bitcoin (BTC) and Ethereum (ETH) supply to new lows on crypto exchanges. Why this is rather bullish for ETH and BTC.
Thanks to social and macroeconomic developments in recent months, more and more people are setting up accounts and wallets on crypto exchanges. The cryptocurrency sector is moving more and more into the Bitcoin Lifestyle spotlight and more and more people are questioning the decision-making processes of governments and central banks. These developments can also be observed on Google Trends:
Search queries for the keyword „crypto currencies“ are at a new annual high worldwide. As a result, buying pressure on Ethereum and Bitcoin may increase.
Meanwhile, the increasing amount of Ether and Bitcoin deposited in the DeFi sector to generate interest, among other things, is leading to fewer and fewer BTC and ETH on crypto exchanges. Data from crypto analytics firm Glassnode illustrates this trend for Ethereum:
In addition, many analysts believe that the rapidly expanding DeFi sector, the staking rate of ETH 2.0 and the increasing participation of institutional investors, are the main reasons for the decline in crypto exchanges.
Since 2020, Bitcoin has attracted the interest of institutional investors. Companies such as MicroStrategy and Square have brought Bitcoin into the mainstream, among others, ensuring that the crypto space gets attention.
In addition, some companies and institutions see Bitcoin as a legitimate investment and are now going in search of the next big opportunity. Many of them are finding this in the rapidly growing DeFi sector on Ethereum – which has triggered a DeFi boom on crypto exchanges.
Grayscale Investment also saw a huge surge of interest in its crypto trusts. In 2020, it even came to the point where the asset manager had to close due to the dramatic rise in the price of Bitcoin and Ethereum.
But the restrictions were lifted again at the beginning of January and since then the Ethereum Trust (ETHE) in particular has been able to perform very well. As a result, there is even less Bitcoin and Ethereum to buy on crypto exchanges overall, further tightening the supply.