Ethereum Exchange Outflows Drops to 4-Year Low, But Here's Why It Isn't as Bad as You Might Think

Ethereum Exchange Outflows Drops to 4-Year Low, But Here's Why It Isn't as Bad as You Might Think

According to data provided by Glassnode and WuBlockchain, Ethereum's exchange outflows have reached a four-year low, which might confuse some traders and investors since the outflow indicator remains one of the main ways of determining trends on the crypto market.

Why Outflow Volume might confuse some

As numerous on-chain and market analysts note, Outflow Volume is usually used as the main indicator of a bullish trend. With low Outflow Volume, the selling pressure on the market decreases, which directly impacts the asset's price.

According to glassnode, Ethereum's exchange outflow (7d MA) reached a four-year low (6122). pic.twitter.com/OIEkpDJdcG— Wu Blockchain (@WuBlockchain) December 27, 2021

In addition to the Outflow Volume, traders use exchange reserves indicators that tend to correlate with outflow volumes. But in this case, Outflow Volume has dropped significantly, which might be considered a bearish signal by some traders, though it is not necessary.

The low Outflow Volume might be tied to the fact that Ethereum exchange reserves are too low and the number of traders or investors that are holding their funds on exchanges reached record-low values.

If the majority of traders and investors are not holding the main portion of their Ethereum collateral on exchange addresses, Outflow Volume will most certainly decrease until exchange reserves recover to Ethereum's pre-pump values.

Ethereum's performance on the market

Ethereum still remains in one of the strongest positions on the cryptocurrency market with a gain of more than 40% in the last three months. After the major correction on the cryptocurrency market, Ethereum has become even more valuable among investors, thanks to its relatively neutral performance in the last two weeks.

While the majority of assets on the market have lost up to 30% of their value, Ethereum has gone through an 8% correction and is now consolidating at $4,000 support.

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