Ethereum (ETH) withdrawals from exchanges accelerated ahead of the London upgrade, data shows show

In the run-up to the much-anticipated London upgrade, cryptocurrency exchanges are grappling with accelerated withdrawals from ETH, as on-chain data from CryptoQuant shows.

Staking on Eth 2.0

By July 5, the ETH reserves had fallen to a two-and-a-half year low on all leading cryptocurrency exchanges.

The reason for this is the relatively high ETH prices as the coin shortage increases. Analysts attribute this development to several factors.

On the one hand, Ethereum is moving from a proof-of-work to a proof-of-stake consensus algorithm system that removes miners for validators.

The latter system requires ETH staking.

Since December 1, 2020, when phase 0, Beacon Chain, was activated, validators have been flowing into the parallel network and securing it by staking coins.

Unlike other proof-of-stake blockchains, Ethereum is fully functional and has superior infrastructure and activity among all public chains.

By comparison, Ethereum’s transaction count exceeds that of Bitcoin, even though the latter is the first public chain.

Staking, observers explain, is one of the main reasons behind the outflow from exchanges, where ETH holders prefer to generate passive returns without fear of the network bursting.

Ethereum whales now hold over 70% of the coins in circulation

In the meantime, whales are sniffing opportunities before implementing what could potentially shape Ethereum and ETH prices in the coming days.

Data from Santiment shows that whale activity is accelerating. For the first time since September 2017, they now hold 70 percent of all ETH in circulation.

Revival of DeFi activities and the London upgrade

With cryptocurrency exchanges struggling to contain the outflow, DeFi protocols continue to lock down more ERC-20 tokens and ETH.

In early July, DeFi TVL rose from around $ 48 billion to $ 56 billion, according to Defipulse. During this time, ETH prices also rose to over USD 2,000 at spot rates.

In particular, the decline in ETH prices led to an increase in the ETH movement to exchanges for liquidation purposes, and DeFi activity shrank at the same time. Therefore, this trend reversal indicates trust and a possible re-evaluation of ETH if demand increases.

This buildup is prior to EIP-1559 during the London upgrade set for this month. The improvement makes gas charges more predictable and ETH deflationary due to charge burning.

As reported by BTCManager, the EIP-1559 tests are running.

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