At the current time, Ethereum was exchanging hands at $2,401 following a nearly 2% decrease in its price over the past 24 hours. This decline coincided with a bearish sentiment prevailing the wider cryptocurrency market, as evidenced by the Fear and Greed Index dropping to a seven-day low of 39, indicating a prevailing state of fear among traders.
Yet, holders of Ethereum might have more reasons to worry, as Chinese authorities are looking to potentially offload 542,000 ETH, equivalent to over $1.3 billion.
Ethereum Confronts Surprising Supply Overhang
An analysis by onchain researcher ErgoBTC suggests that ETH is facing an unforeseen supply overhang following the movement of 7,000 ETH to exchanges. These tokens are part of the 542,000 ETH confiscated from the PlusToken cryptocurrency Ponzi scheme back in 2018.
The Ponzi scheme had amassed over 194,000 Bitcoin (BTC) and 830,000 ETH before being shut down. The majority of the Bitcoin was likely sold off between 2019 and 2020, with a third of the ETH also being liquidated in 2021.
The remaining balance of 542,000 ETH was consolidated across multiple addresses in August 2024, and currently, some of these coins are on the move.
On October 9th, a total of 15,700 ETH was withdrawn from these addresses, with close to half of it being transferred to the BitGet, Binance, and OKX exchanges.
According to the research, these transfers mirror a similar pattern observed during the selling of Bitcoin by authorities in 2020. This situation places ETH in a vulnerable position where selling pressure could see a significant uptick in the upcoming weeks.
Ethereum Exchange Reserves Hit a Three-Week Peak
These recent deposits have resulted in a notable increase in Ethereum exchange reserves, reaching a three-week apex as indicated by data from CryptoQuant.
In the past 24 hours, the total ETH holdings on exchanges rose by more than 110,000 tokens, marking the highest level in three weeks.
This data reveals that numerous traders are transferring their holdings to exchanges with the intention to sell. Moreover, the most significant spike in reserves was witnessed on derivative exchanges, which could potentially lead to increased volatility for Ethereum.
Further insights from IntoTheBlock indicate a surge in large transaction volumes, hinting at a rise in whale activity. Despite this surge, Ethereum’s lack of price growth amidst increased large transactions could imply that these transactions are predominantly sell-side activities rather than purchases.
Liquidation data underscores the bearish impact of these hefty exchange deposits on Ethereum. According to Coinglass, over $31 million worth of ETH was liquidated in the past 24 hours, with $27 million constituting long liquidations.