Traders move ETH into DeFi

LendoChain
2 min readApr 19, 2022

According to Samuel Haig writing for The Defiant, over the past few days traders have been pulling their ETH from centralized exchanges and locking them into DeFi smart contracts. This signals, according to Haig, that these traders believe the markets are about to climb higher.

Data from Glassnode shows that the number of ETH stored on exchanges is at its lowest level since August 2018. However, if you look at that figure from a percentage basis, Ethereum’s centralized exchange balance is at its lowest level since July 2016 — when ETH traded for just $10.

Shifts in exchange balances tend to suggest that investors are holding on to their crypto for the long-term, and are placing them into cold storage for safekeeping, or in DeFi smart contracts to earn yields.

Analyst Willy Woo, a well-known character in the crypto community, commented last year that when “supply shocks” on centralized exchanges coincided with stable prices, the market is about to rise. For example, he pointed out that when exchange balances plummeted during both May 2020 and July 2021, the price of ETH rose quite sharply shortly after.

ETH is not the only digital asset that traders are moving out of centralized exchanges. On April 13, crypto analyst Will Clement published a chart showing that traders withdrew Bitcoin from centralized platforms at a startling pace over the past few weeks. He tweeted, “On only 3 other occasions have we ever seen Bitcoin withdrawn from exchanges at this rate.” Those occasions were most recently in May and December of 2020, and both preceded periods of BTC price rises.

While ETH balances on centralized exchanges plummet, the amount of ETH staked in DeFi protocols is rising. The sum of ETH deposited in smart contracts is approaching an all-time-high (ATH), with 27.5% of supply, or 33.1M Ether, locked in DeFi protocols. The last time the ETH supply locked in smart contracts broke an ATH was in the ‘DeFi summer’ of 2020, which was accompanied by significant price gains for ETH.

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