Ethereum (ETH) Supply Plunge on Binance Hints at Massive Price Squeeze

Ethereum (ETH) holdings on Binance have dropped noticeably over the past few days. On-chain metrics show that the platform’s Exchange Supply Ratio for ETH has fallen to its lowest level in several weeks.

Meanwhile, this ratio measures the amount of Ethereum held on the exchange compared to its total circulating supply. A lower ratio usually indicates that more ETH is being moved away from the exchange.

This drop suggests users may be transferring their ETH to cold wallets or decentralized platforms. It can be often associated with a reduced short-term selling activity.

As the largest exchange in terms of trading volume and liquidity, Binance can be a solid indicator on the general direction of the market. A shift in ETH supply here can reflect changes in the actions of both retail and institutional traders.

Historical Data Connects Supply Drops to ETH Price Moves

This is not the first time such a drop in exchange supply has occurred before a price move. A similar situation developed around April 11.

In that instance, Ethereum’s supply on Binance dropped in the days leading up to a major rally. ETH price climbed from under $1,700 to nearly $1,950 within a week, recording a 14% rise.

These past movements provide a reference point for current market watchers. A repeat of such conditions can lead to speculation about potential short-term price increases. The lower the available supply on the exchange, the easier it becomes for price to move upward in the absence of heavy selling.

Short Liquidity Pools Grow Above $1,900

Recent trading data shows a buildup of short liquidations between the $1,900 and $2,000 price range. This development indicates that many traders are betting on ETH’s price going lower. These short positions, if the market moves up, could quickly get liquidated. Such conditions often lead to what’s known as a short squeeze.

A short squeeze happens when rising prices force short sellers to close positions by buying back the asset, causing more upward pressure. With ETH’s current exchange supply shrinking, less resistance exists to hold back upward price moves. The region between $1,900 and $2,000 is currently a zone filled with these short positions, creating a target area for upward movement.

Binance Leads in ETH Outflows Despite Overall Drop

Over the past month, centralized exchanges have seen a drop in total outflows of Ethereum. However, Binance has been the exception. Around 49% of all ETH withdrawn from exchanges came from Binance, setting a new record for its share of Ethereum outflows. This stands out, especially as total ETH outflows across platforms have been trending down.

Alongside Ethereum, Binance also handled 22% of all Bitcoin outflows during the same time. These figures point to Binance as a preferred platform for withdrawals, even as the overall market activity cools. Such a concentration may reflect actions by large holders or custodians moving funds off exchanges.

ETH Price Movement and Chart Formation

Ethereum has traded below the $2,000 level for most of the past two months. The price hit a low of below $1,400 on April 9. It had made something that amounted to a run to $1,550 and higher by April 22, though following a broad market lift on Bitcoin it regained momentum. The ETH price, however, dipped again on April 30, falling to $1,736 within two hours.

ETH price simply had more forced closures during this dip, topping $67 million compared to Bitcoin’s $64 million. Of the total $291 million, $48 million was on long positions, per Coinglass data. Such liquidations often lead to a rapid drop in price, ruining leveraged traders and short-term sentiment.

Following this, Ethereum’s short-term chart has formed a head and shoulders pattern. This technical formation is usually connected to trend reversals, and how traders will assess the upcoming price movement might change.

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