The Number of Ethereum Exchange Withdrawals Hits a One-Year Low
There has been a marked drop in Ethereum-related activities on various crypto exchanges in the last week. On Monday, November the 20th, on-chain data from leading blockchain data and intelligence provider, Glassnode, indicated that the seven-day moving average of Ethereum (ETH) withdrawals from exchanges such as Coinbase and Kraken, had plummeted to a one-year low of 1,176. This current dip is three points lower than the previous plunge of 1,179, which was recorded nine days earlier on the 11th of December.
Why Investors May not Be Making Ethereum Withdrawals
The Ethereum network represents one of the foundational blockchains, alongside Bitcoin and Solana, on which huge chunks of developer and user activities in the cryptoverse are based. As such, any dip in the number of Ethereum withdrawal activities is often a harbinger of the broader sentiment in the crypto space.
The drop in the number of Ethereum withdrawals could be as a result of investors staying their hand in order to see what short-term and long-term effects recent pronouncements from leading policymakers might have on the value of ETH. The Federal Reserve Chairman, Jerome Powell, recently announced that the Fed will slow down its bond purchasing program, pointing out that the U.S. economy no longer requires increasing amounts of policy support.
The Federal Reserve, which acts as the U.S. central bank, manages the United State’s monetary policy, and what it does or says usually has ramifications in both the traditional money markets and the crypto markets.
Another policymaker whose words may have stalled Ethereum withdrawal activities on the crypto exchanges is the Securities and Exchanges Commission (SEC) Chairman, Gary Gensler. In a recent interview with the Wall Street Journal, Gensler reiterated the need for enhanced regulations in the crypto space. The SEC chairman further requested that crypto exchanges work hand-in-hand with the commission to enforce those regulations.
The Biden Infrastructure Bill
The $1.2 trillion infrastructure bill, just signed by President Joe Biden, also has implications for crypto investors because it includes provisions to firm up tax reporting requirements for crypto exchanges. In addition to the tax requirements for crypto exchanges, the Biden administration is also proposing new laws to regulate stablecoins.
If these proposals were to be approved by Congress, then stablecoin issuers would be classified as banks and put under similar regulations. Since the ramifications of those provisions have not yet been fully discerned, many crypto investors, including ETH holders, may be biding their time, waiting to fully understand them before making further moves in the market, consequently leading to a slow down in withdrawal activities.
ETH’s Possible Price Trend
The sluggish rate of Ethereum withdrawals could be the ongoing upgrade of the network as it seeks to introduce a newer proof-of-stake protocol that will be more energy efficient. Investors may be holding their assets in anticipation of these upgrades.
Since it hit an all-time high of $4,891 in mid November, Ethereum has seen big ups and downs. The token entered December priced at slightly below $4,880, but has spent the last couple of weeks around the $4,000 mark. On Monday this week, the price of Ethereum dropped below $3,800, and given this volatility, investors might be holding their assets in expectation of a more sustained rally in the near future, thus resulting in fewer activities on the exchanges.