Ethereum Price News: Supply Shock Ahead? Exchange Balances Hit a 2-Year Low

Ethereum (ETH) has gone down by 2% in the past 24 hours and trading volumes remain quite high, nearing 9% of the token’s circulating supply as downward volatility persists.

The U.S. Senate introduced a new bill in the House to put an end to the country’s longest shutdown. This amended version received the “yay” from 60 Senators from both sides of the aisle.

However, the market continues to be hesitant, and today’s drop reflects a cautious attitude ahead of an uncertain outcome.

Other altcoins like XRP (XRP) and Solana (SOL) dropped by 5% while Bitcoin (BTC) retreated by a similar 2.4%.

Exchange Balances Drop as ETH Buyers Seem Committed to HODL

Despite the latest selling spree, one interesting metric shows that buyers have bought the dip. Data from CoinGlass shows that Exchange Balances for ETH have dropped to the lowest level in two years, at nearly 12 million.

Exchange Balances for ETH – Source: CoinGlass

High exchange outflows typically indicate that buyers are putting their tokens in cold storage, mainly for staking purposes or to hold them for a long while.

This is typically interpreted as a bullish signal and could set the stage for a supply shock at a point when exchange-traded funds (ETFs) and corporate treasuries are amassing high volumes of ETH tokens.

If we get a sudden uptick in ETH, possibly prompted by the resolution of the shutdown, Ethereum could suffer a supply shock that would propel its price beyond $4,000 rapidly as the token’s free float has been shrinking.

According to data from CoinGecko, treasuries holding ETH currently accumulate 4.5% of its circulating supply, or around 5.4 million tokens. These assets are worth nearly $19 billion, and underscore how rapidly institutional adoption is growing.

The largest of these vehicles is BitMine Immersion, which acquired in the last 30 days alone over 675,000 ETH valued at over $2.3 billion.

Two Scenarios for Ethereum Based on How the U.S. Shutdown Situation Plays Out

We have a couple of scenarios for ETH depending on how the price reacts and what happens with the shutdown.

ETH/USD Daily Chart (Binance) – Source: TradingView

The Fear and Greed Index has slipped to fear territory once again at 27 and is nearing its 7-day low. This reflects the market’s cautious attitude ahead of any announcement this week.

The bullish scenario for ETH involves a breakout that reverses the latest downtrend and pushes the token out of the descending price channel shown in the chart. This would quickly put ETH on track to retest the $4,000 psychological threshold and could possibly rise beyond this mark if bullish momentum gains traction.

Meanwhile, the bearish scenario sees ETH maintaining its current trajectory and could lead to a drop to $2,700 in the near term, meaning a 23% downside risk.

At the time, the risk-reward ratio for a long position is a bit unfavorable, unless ETH explodes past $4,000, which is not necessarily the most likely scenario. Hence, short sellers may have the upper hand in these conditions unless the end of the shutdown flips the tables.