Ethereum News Today: Is Ethereum’s Shrinking Supply a Real Driver for Growth or Just Exaggerated Buzz?

Ethereum is facing an escalating liquidity shortage as supply becomes increasingly restricted. On-chain statistics reveal that more than 40% of all ether (ETH) is now locked away in staking, exchange-traded funds (ETFs), or inactive wallets. This significant "supply vacuum" has led to diminished selling activity and heightened institutional interest, prompting speculation that

may soon surpass its previous record high. Experts point to a unique combination of factors—unprecedented ETF inflows, protocol-level staking, and sustained capital retention—as fundamentally altering ETH’s supply landscape and potentially paving the way for a major price rally.

Several mechanisms are contributing to the shrinking available supply. Roughly 29.5% of

is currently staked in the network’s proof-of-stake system, with withdrawals subject to a 40-day waiting period. Additionally, 7.3% of ETH is held within ETFs, where tokens are inactive for the majority of the time, and another 3.4% is stored in dormant wallets or decentralized autonomous treasuries (DATs), effectively removing them from circulation for extended periods or indefinitely. Altogether, these segments have sidelined over 40% of ETH, intensifying the liquidity squeeze and potentially increasing price swings in the near future.

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This trend has been accelerated by growing institutional participation. U.S.-listed ETFs now hold 6.84 million ETH—valued at $28 billion—representing 5.6% of the total supply. Publicly traded companies, such as Tom Lee’s Bitmine, collectively own more than 12% of ETH, with some aiming to control 5% of the circulating supply. For example, SharpLink Gaming possesses 839,000 ETH, resulting in unrealized profits exceeding $900 million. These corporate holdings echo Bitcoin’s treasury strategies, but are further enhanced by Ethereum’s average staking returns of 4.3%.

The effects on price are already apparent. Ethereum’s reserves on Binance have dropped to historic lows, indicating less selling as the price approaches the $4,600 resistance level. Blockchain analysts highlight that, in previous cycles, sharp drops in exchange balances often preceded price pullbacks. However, this time, significant withdrawals have aligned with upward price momentum. According to CryptoQuant’s Arab Chain, ETH’s Binance supply ratio has decreased to 0.33, nearing its lowest point since 2025, as more investors move their assets to decentralized storage and staking platforms.

Optimism is further fueled by Ethereum’s deflationary features. Since the merge, net issuance has turned negative during periods of high network activity, with EIP-1559’s burn mechanism destroying more ETH than is created. The combination of staking lockups and ETF holdings accelerates this trend, reducing the liquid supply at a pace not seen in previous cycles. Analysts such as Crypto Gucci believe that the current environment—marked by strong institutional demand, limited liquid supply, and ongoing supply absorption—creates ideal conditions for significant price growth.

Yet, some experts remain skeptical. Detractors argue that the supply shortage narrative is overstated, noting that ETH has not yet exceeded its 2021 all-time high despite months of tightening supply. Currently trading at $4,100, Ethereum is still below its previous peak, though it has maintained important support levels. Technical analysts suggest that a breakout above $4,952 could open the door for further gains.

The next few months will be crucial for Ethereum. With the Fusaka upgrades improving scalability, potential approval of staking ETFs increasing institutional inflows, and macroeconomic trends such as M2 growth influencing valuations, the market is poised for a decisive move. Whether Ethereum sets a new record or faces renewed doubts will depend on how these factors—supply constraints, institutional interest, and overall market sentiment—play out in the near term.