Ethereum’s supply on exchanges has dropped to its lowest level since November 2015, with just 8.97 million ETH available

According to a Mar. 21 analysis by Santiment, this decline is largely due to the growing popularity of decentralized finance and staking. Sell pressure has decreased as more holders lock up their assets rather than keeping them on exchanges. Ethereum’s (ETH) exchange supply has decreased by 16.4% in the last seven weeks, indicating a long-term accumulation trend. 

But this supply squeeze hasn’t benefited Ethereum’s price, at least yet. ETH has plunged 47% from its December high of $4,105 to its Mar. 21 price of $1,990, making it one of the worst-performing major cryptocurrencies.

On-chain and technical indicators suggest further downside. Standard Chartered analysts recently lowered their ETH price target by year-end from $10,000 to $4,000, citing increased competition from other networks, especially Ethereum layer-2s.

Because they charge less fees, layer-2 networks are attracting more users and decreasing mainnet activity. According to DeFiLlama data, the past week’s volume processed by Ethereum-based DEX protocols was $9.8 billion, of which $5.67 billion was handled by Arbitrum (ARB) and Base alone.

Monthly DEX volume on Ethereum has fallen from $92 billion in December to $82 billion in February, with even smaller volumes expected in March. This drop in mainnet usage has impacted Ethereum’s fee revenue, a key part of its economic model. From $218 million in December to just $46 million in February, Ethereum’s fee revenue has drastically decreased.

Although transactions are now less costly thanks to the Dencun upgrade, which reduced gas fees by 95%, Ethereum’s revenue continues to decline. Ethereum’s total value locked has also dropped from $76 billion in December to $46 billion as of press time. 

A potential lifeline for Ethereum could come from the staking of exchange-traded funds. Both the New York Stock Exchange and Chicago Board Options Exchange have submitted requests to the U.S. Securities and Exchange Commission to permit staking in Ethereum ETFs. Given that Ethereum Spot ETFs saw $370 million in outflows over the previous month, institutional interest is still low. 

On the technical side, Ethereum continues to decline and is facing resistance at $2,042. The 50-day moving average is acting as a barrier, and the Bollinger Bands show low volatility, suggesting consolidation.

ETH is recovering from oversold conditions, but it lacks significant momentum, according to the RSI, which is at 41.22. While weak volume indicates trader uncertainty, a slight uptick indicates some accumulation.

The next targets are $2,163 and $2,370 if ETH breaks above $2,042. If $1,986 is not held, there may be a decline toward $1,714, where previous buying interest has emerged.