While efforts for recovery continue in the cryptocurrency market, the supply of Ethereum (ETH) on exchanges has dropped to its lowest annual level. On-chain data indicates that investors are withdrawing their ETH from exchanges, showing a tendency for long-term storage, while the increase in leverage usage signals a higher market risk appetite.

As the cryptocurrency market continues its recovery efforts, Ethereum (ETH) saw a 9% increase in value last week. With the general market improvement, rising ETH could gain stronger momentum alongside some critical developments seen in on-chain data. The decrease in ETH supply on exchanges to its lowest annual level and the increasing use of leverage by investors are among factors supporting bullish expectations.

ETH SUPPLY ON EXCHANGES DECREASES TO ANNUAL LOW

According to data from on-chain analysis platform CryptoQuant, ETH’s exchange reserve has dropped to 18.32 million. This figure represents a 7% decrease from the 19.74 million coins reached on February 2.

The reserve amount on exchanges represents the supply actively available for trading a particular asset on platforms. The decrease in reserves indicates that investors are starting to withdraw their ETH from exchanges to hold in long-term wallets, stake, or potentially move towards a spot ETH ETF. This trend, by reducing the circulating supply of ETH in the market, can create upward pressure on prices.

INVESTORS INCREASING LEVERAGE USAGE

In addition to the decrease in ETH supply on exchanges, there is an observed increase in investor interest in leveraged trades. CryptoQuant data reveals that Ethereum’s Estimated Leverage Ratio (ELR) indicator reached 0.686 on March 21, the highest level since the beginning of the year. Following a minor pullback, this ratio is currently at 0.683.

The ELR indicator measures the average leverage amount investors use to trade on a cryptocurrency exchange. A high ELR ratio indicates investors hold strong expectations for a future rise in ETH price and therefore are trying to increase positions with leverage. Despite fluctuations in ETH price since the beginning of the year, the rising leverage ratios indicate a significant increase in investor risk appetite.

ETH Price at Critical Levels: $2,224 or $1,924?

Ethereum’s price rose by 4% in the last 24 hours to reach $2,089. According to Elder-Ray Index data, the buying pressure in the market is increasing, with the green histogram bars on the indicator showing a strengthening uptrend. The index value climbed to 52.80, reaching its highest level in the past 30 days.

These data suggest the start of an uptrend in ETH price with bulls attempting to control the market. If Ethereum buyers maintain control, it seems possible for the price to test $2,148. However, in case of increased selling pressure, ETH could first drop to $1,924 and then further down to $1,759.

The overall market outlook signals a critical period for Ethereum. The decreasing supply on exchanges and the rise in leveraged positions are viewed as signs of an upward trend. However, any potential change in investor sentiment or unexpected market developments could lead to new fluctuations in ETH price.