A sharp drop in Ether Balance (ETH), the Ethereum network’s cryptocurrency on centralized exchanges, has been interpreted by some market participants as a bullish signal.
But for a developer and commentator known as “Jrag.eth,” this interpretation is based on assumptions that are no longer valid in the current ecosystem. A decrease in ETH on an exchange means an immediate shortage on the seller side.
According to the graph below, which compares the proportion of Bitcoin and ETH balances on exchanges and price trends, ETH has recorded an accelerating decline in the supply available on exchanges. By the end of November 2025, it will reach 8.84% of the total.
Despite prices showing a period of stability, this movement will intensify from mid-2024. This difference strengthens Jrag.eth’s central argument. The relationship between exchange reserves and selling pressure has changed.
ETH moves from CEX to DEX
“Funds coming out of centralized exchanges flow into DeFi protocols,” the analyst says. And while previously a reduction in reserves could be interpreted as a substantial reduction in liquidity for sale, today that capital does not disappear, he explains. It simply moves to an infrastructure where buying and selling activities continue. “Selling pressure also occurs on-chain through stablecoins,” he explains.
This means, according to experts, that a significant part of sales activities will no longer take place via centralized exchanges (CEXs) and will now take place directly within decentralized protocols (DEXs). In these environments, users exchange Ether for stablecoins (such as USDC or USDT). Utilize automated liquidity pools.
Jrag.eth claims that this metric “may have been in alpha six years ago when CEX was the only way to go, but it is now obsolete.” In his opinion, it is a mistake to present the decrease in ETH available on exchanges as evidence of a structural shortage.
“They’re trying to imply that there’s a shortage on the sales side,” he says, when in fact he clarifies: Sales simply take place within a decentralized protocol.
Graphs support this approach. As the proportion of stored ether decreases rapidly, Prices do not show comparable rebound. This contrast is striking with past episodes where similar pullbacks were used to predict bullish moves. According to analysts, the reason is clear. Because CEX is no longer focused on the commercial activities of the ecosystem.
3 Possible Reasons for ETH to Fall on Exchanges
The debate regarding the usefulness of ETH volumes on exchanges is not new. In an analysis published last September, a CryptoQuant community analyst known as CryptoMe explained three possible reasons for the decline of ETH on exchanges.
These were movements towards personal wallets and DeFi. Recent purchases will be immediately moved to self-storage. or internal address reconstruction by the exchange.
According to experts, the prevailing theory at the time was the second, and although a decline in liquidity was observed, Warned that it would not lead to a “supply shock”. This is because “sales absorb purchases,” CriptoNoticias reported.
This analysis was created when the weight of DeFi activity was lower compared to the market at the end of 2025. According to Jrag.eth, it is precisely this structural change that makes it inadequate and even misleading. Interpret reserves as a bullish signal.
Jrag.eth reveals that Criticism of indicators does not imply pessimism towards digital assets. “I’m still very optimistic about ETH, but not because of this information,” he said.
Developers claim that Ethereum’s strength is reflected in its growth in on-chain activity over traditional metrics designed for less decentralized markets.
In a DeFi ecosystem where liquidity and trading volumes become increasingly concentrated, exchange balance metrics lose their meaning in predicting price movements. The divergence between the graph and the movement of ETH confirms that the market is operating under new dynamics. Selling pressure will no longer only be routed through centralized exchanges.
