Over the past two days, there has been a sharp decline in Ethereum reserves on crypto exchanges. According to the CryptoQuant.com service, during this period, users withdrew from trading platforms about 2 million coins, at the current exchange rate it is almost $ 2.5 billion. Platform reserves decreased by 20%, to 8 million ETH, writes RBC Crypto.
Users have been withdrawing Ethereum from exchanges since summer. Then the reserves of the trading floors were 13-14 million coins. This indicator fell as the altcoin price rose. Since the summer of last year, ETH has risen in price five times to $ 1,250 per coin, and the stock of the asset on the exchanges has decreased by almost 40%.
There may be several reasons for this dynamic. The first is the actual strengthening of Ethereum. Many investors who buy cryptocurrency for a long time prefer not to store it on exchanges, but to transfer it to cold wallets. This is for security reasons, as trading platforms can be hacked.
User concerns about exchange hacks likely intensified in late summer. Then, incidents occurred at several sites that could undermine investor confidence and become the second reason for accelerating the process of withdrawing assets from exchanges.
At first, unknown persons withdrew $ 280 million from the large KuCoin trading platform, at the same time the small Etherbase exchange was hacked. Then another popular exchange OKEx turned off withdrawals without warning. Users could not pick up assets for over a month.
The third factor contributing to the withdrawal of Ethereum from exchanges could be the growing popularity of the decentralized finance (DeFi) sector. It includes various services, which, among other things, allow you to passively receive income from cryptocurrency, providing it as liquidity. This works by analogy with a deposit in a bank – the investor transfers capital to the platform and receives interest on it.
The fourth factor could be the launch of phase zero of the second version of Ethereum. In December 2020, the developers launched the Ethereum 2.0 deposit contract. Now investors can transfer their coins to it and passively increase their number through staking, which works in a similar way to deposits. The annual profitability of staking is currently about 10%, excluding costs. As of January 15, users have transferred over 2.5 million ETH to this contract, according to launchpad.ethereum.org.
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