The total reserves of cryptocurrency exchanges fell by 7.3% to 22.8 million ETH over the past week alone. Twocircumstances are pushing users to withdraw coins to cold wallets: the transition to PoS promised this year and the ongoing series of bankruptcies of market participants.
Image source: cryptoquant.com
Now Ethereum relies on miners whocollect transactions into blocks and provide a high level of security and decentralization. However, the low network bandwidth, which does not exceed 20 transactions per second, at high loads leads to a significant increase in the cost of commissions. So, due to the release of a new NFT collection from Yuga Labs in early May, on average, $200 had to be paid per transaction.
Image source: cryptoquant.com
To remedy the situation, Vitalik Buterin chosetransition to PoS, where validators will work instead of miners. According to the developer, this will eventually lead to an increase in decentralization, security and a 95% reduction in energy consumption.
To implement it, parallel to the current networka test blockchain is being developed on PoS. From November 2020, users can deposit funds into a deposit contract and receive staking income. Despite the impossibility of withdrawing funds before the final move, the volume of the deposit contract already totals over $13 million ETH or $20 billion.
Image source: etherscan.io
A successful move will allow the chain to compete withyoung “Ethereum killers” in the speed and cheapness of transactions. More projects will be able to afford Ethereum as their underlying blockchain, which will lead to an increase in investment and the value of the coin. For this reason, a number of users are already buying Ethereum to withdraw to a cold wallet or to deposit.
The second reason for the record Ethereum outflow isloss of confidence in investment funds. Among the major market participants, Three Arrows Capital, Voyager Digital and Celsius are undergoing bankruptcy proceedings. Others are suspending withdrawals, such as Babel Finance and Vauld.
Image Source: Cryptocurrency ExchangeStormGain
But still the leading force is to recognize faithlong-term holders in Ethereum. This is evidenced by the growth of the coin against Bitcoin by 23% over the past two weeks. Exactly from the moment one of the developers designated September 19, 2022 as a potential merger date.
Analytical group StormGain
(platform for trading, exchanging and storing cryptocurrency)
