Ethereum Liquidity Crisis Deepens as Supply Dries Up
Nearly half of all Ether has disappeared from circulation, locked into staking, ETFs, or wallets that rarely move their holdings.
The phenomenon, described by several on-chain researchers as a “liquidity blackout,” could mark a turning point for the asset heading into 2026. According to community data aggregator Taylor.eth, around one-third of the network’s supply now sits in staking contracts alone, where validators face weeks-long delays to withdraw funds. Another significant portion is tucked inside decentralized treasuries or dormant wallets, with some unlikely to move for years, if ever.
A Scarcity Cycle Unlike Any Other
Market observers say Ethereum has never faced this combination of forces before. Crypto strategist Crypto Gucci called it “a triple choke point” for supply – with staking rewards, ETF accumulation, and long-term cold storage all removing coins simultaneously. He argued that institutional demand could amplify the effect, warning that a sudden demand spike might trigger a vertical rally.
That institutional appetite is already visible. Figures from Ark Investments show more than 6.8 million ETH – roughly $28 billion worth – have been absorbed by U.S.-listed exchange-traded funds.
Public companies are also expanding exposure, now estimated to hold over 12% of the entire Ethereum supply. Bitmine, led by Tom Lee, recently boosted its holdings past $12 billion, aiming to corner 5% of circulating tokens.
Liquidity Dries Up Across Exchanges
At the same time, activity on centralized platforms continues to fade. Analytics provider CryptoQuant reports that Binance’s Ethereum reserves have fallen to their lowest level since May, suggesting investors are increasingly shifting assets to private wallets or staking pools. Historically, this pattern has aligned with major price upswings – moments when scarcity meets renewed optimism.
Investor Ted Pillows believes the market is still undervaluing Ethereum relative to macroeconomic benchmarks, predicting a “repricing phase” that could push ETH toward $8,000–$10,000 within the next year.
Still, not everyone agrees that scarcity will guarantee a breakout. Some traders have called the “supply vacuum” narrative a recycled theme, pointing out that Ethereum has yet to establish sustained momentum above its previous peak.
The information provided in this article is for educational purposes only and does not constitute financial, investment, or trading advice. Always conduct your own research and consult with a licensed financial advisor before making any investment decisions.