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Although Ethereum (ETH) is still trading nearly 50% below its all-time high (ATH) of $4,878, signs are emerging that the second-largest cryptocurrency by market capitalization may soon experience a “supply shock” due to dwindling reserves on major cryptocurrency exchanges like Binance.

Binance Ethereum Reserves See Massive Fall

According to a recent CryptoQuant Quicktake post by on-chain analyst Amr Taha, ETH reserves on Binance have been steadily falling since April 14. Taha noted that the exchange’s ETH reserves declined from slightly less than 4.2 million to 3.9 million by May 14 – a drop of around 300,000 ETH in just one month.

Such a sharp decrease over a relatively short period has reignited discussions around ETH’s supply scarcity narrative. When fewer coins are held on exchanges, the selling pressure tends to decrease. This reduction can lead to higher prices if demand remains constant, as the available ETH becomes more limited.

Related Reading: Ethereum’s Notable Rally Above $2,500: Here’s What Pioneered The Upward Move

Taha proposed two possible reasons behind the drop in Binance’s ETH reserves. First, he suggested that investors may be transferring ETH to cold wallets or deploying it in decentralized finance (DeFi) protocols for security or yield generation.

Second, institutional investors may be withdrawing large amounts of ETH for purposes such as over-the-counter (OTC) deals, private investments, or staking. These activities reduce exchange reserves without necessarily creating selling pressure. Taha concluded:

The 300,000 ETH decline in Binance’s reserves suggests a notable shift in investor behavior – possibly toward long-term holding, staking, or institutional accumulation. Although this may alleviate immediate selling pressure, traders should closely observe this trend and its interaction with overall market demand.

Is ETH Preparing To Rally?

Additional data points suggest that ETH may be gearing up for a major rally in the short to medium term. In a separate CryptoQuant post, contributor BlitzzTrading analyzed the behavior of ETH whales.

Related Reading: Ethereum Enters Compression Zone – ETH/BTC Chart Shows Low Volatility May Not Last Long

For context, ETH whales are typically wallet addresses that hold more than 10,000 ETH. BlitzzTrading shared the following chart, illustrating that the last major correction in ETH occurred after whales took profits when the price approached $4,000.

Currently, these whales do not appear to be engaging in significant profit-taking. However, BlitzzTrading advised closely monitoring this metric, as a spike in whale selling could signal a potential correction once ETH enters overbought territory.

Several analysts have set ambitious price targets for Ethereum in this market cycle. For example, crypto analyst Ted Pillows recently predicted that ETH could reach $12,000 later this year.

Pillows also pointed out that ETH appears to be following the Wyckoff Accumulation pattern – a classic market structure that often precedes significant price increases. He believes that if current momentum holds, ETH could reclaim the $4,000 level by Q3 2025.

Ethereum’s fundamentals are also strengthening. The network recently completed the highly anticipated Pectra upgrade, which is expected to enhance performance and security. At press time, ETH is trading at $2,541, down 2.2% over the past 24 hours.

Featured Image from Unsplash.com, charts from CryptoQuant and TradingView.com

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