ETH is the king of altcoins and there is no doubt about that. In the past week, several on-chain indicators have developed in favor of ETH and promise higher returns in the long term. Plus, it’s currently surrounded by an atmosphere of invincibility, suggesting that ETH might also avoid short-term corrections.
However, that is unlikely. The article delves deeper into the supply of top addresses and how bearish divergences are created regardless of how the supply changes.
Less supply on exchanges does not mean less capability more customization
Offer on the stock exchange | The source: mood
According to Santiment, the supply of ETH held on exchanges has decreased by 15%. Last year it was around 23% at the same time. It is foreseeable that ETH will switch to smart contracts, DeFi protocols, cold wallets and staking addresses, which will improve market stability and reduce selling pressure.
Technically, this makes perfect sense, as the supply on the market is less liquid, which means that demand will increase significantly. It doesn’t really remove any short-term downtrend concerns, however.
Because the supply held in the chain is still high enough to create a divergence in the chart.
Percentage of offer due to above The top 1% of addresses hold | Source: Glassnode
According to Glassnode, the share of the top 1% of addresses in the ETH offer is almost 96%. This metric has not fallen below 95% since February 2018 and shows that a few thousand addresses contain significant amounts of ETH. Note, however, that these addresses can belong to more than one person, organization, or foundation.
A particular address doesn’t necessarily belong to a single person. On the other hand, some addresses can cause price changes. From there, a group of investors make “huge” profits and decide to collectively take profits that can set the market moving.
Does it affect the decentralized character of ETH? Technically, the answer is no.
ETH Herfindahl index | Source: Glassnode
The ETH Herfindahl index has held lower values since the beginning of January 2016. A lower Herfindahl index indicates that the ETH is more evenly distributed over the addresses. This metric does not take into account stock exchange addresses, smart contract addresses and other special system-specific addresses (e.g. fund addresses for teams).
The core of the story remains the same. In the short term, the low supply of ETH on the stock exchanges does not rule out the possibility of a correction, since market structure reversals and profit-taking are an essential part of this volatile market.
The decision to invest in the market with a risk-adjusted adjustment is absolutely essential as no digital asset is resistant to market sell-offs.
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According to AMBCrypto