Ethereum (ETH), the second-largest cryptocurrency with a market cap of $201.2 billion could be heading toward a supply-crunch. Latest blockchain data shows that nearly 40 million ETH has been staked on the network, despite the reduction in the digital asset’s price over the past year.
Ethereum staking proportion reaches new high
The following ETH daily chart shows the dramatic fall in ETH’s price since the beginning of the year. The digital asset has pulled back by more than 50 percent over the past 6 months – sliding from more than $3,400 to $1,679.
In the same duration, the percentage of ETH staked on the network has increased from 36 million to more than 39.7 million – meaning that nearly 33 percent of ETH’s total circulating supply is locked. It displays a clear preference for staking ETH for the long-haul rather than selling it.
Staking activity has also remained relatively stable, with no major inflow or withdrawal waves seen in recent months. If ETH holders were anticipating lower prices ahead, a decline in the staking ratio would already have happened.
Consequently, ETH’s long-term liquid supply is seeing greater tightening. While this does not alone guarantee higher prices, it does remain a structurally bullish factor. If demand returns in the market, a shrinking supply can potentially amplify future price recoveries.
ETH’s trend is still bearish
Although a higher amount of circulating Ethereum supply getting staked is bullish, ETH is still making lower highs and lower lows, confirming that the digital asset’s short-term trend remains bearish and it is yet to form a bottom.
When comparing the rising staking percentage with the declining price, there is a clear divergence in motion, and historically, such trends don’t usually last for long.
Either price eventually catches up with the ongoing accumulation and recovers, or macroeconomic pressure persists and keeps ETH under pressure for longer.
That said, it cannot be ruled out that ETH’s local bottom may be closer than what most investors anticipate. Despite the bearish short-term price trend, long-term investor behavior is not exactly showing a bearish bias.
To sum it up, the probability of Ethereum consolidating at current price levels and recovering some of its recent losses is far higher than that of accelerated selling in the coming weeks.
Institutional interest in the digital asset remains strong, with Bitmine bolstering its holdings by 126,971 ETH on Monday.
