Much of the capital that leaves centralized exchanges goes to DeFi protocols.
In the decentralized environment, ETH is also exchanged for stablecoins, increasing the supply.
The sharp drop in the balance of ether (ETH), the cryptocurrency of the Ethereum network, on centralized exchanges has been interpreted by some market participants as a bullish signal.
But, for the developer and commentator known as “Jrag.eth”, this reading is based on an assumption that is no longer valid in the current ecosystem: the idea that less ETH on exchanges implies immediate shortages on the sell side.
According to the graph below — which compares the percentage of bitcoin and ETH balances on exchanges versus price evolution — ETH is registering an accelerated decline in its available supply on exchange houses, touching 8.84% of the total at the end of November 2025.
The movement intensifies from mid-2024, even as the price shows periods of stability. This divergence reinforces Jrag.eth’s central argument: The relationship between reserves on exchanges and selling pressure has changed.
ETH moves from CEX to DEX
“The capital that leaves centralized exchanges goes to DeFi protocols,” points out the analyst. And he explains that, although previously a drop in reserves could be interpreted as an effective reduction in liquidity to sell, today that capital does not disappear. It simply moves to infrastructures where the buying and selling activity continues. “Selling pressure also occurs on-chain through stablecoins,” he explains.
This means that, according to the specialist, a significant part of the sales activity stopped being channeled through centralized exchanges (CEX) and now occurs directly within decentralized protocols (DEX). In these environments, users exchange ether for stablecoins—such as USDC or USDT— using automated liquidity pools.
Jrag.eth maintains that this indicator “could have been alpha 6 years ago when CEXs were the only way out, 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 are trying to imply that there is a shortage on the sales side,” he says, when in practice, he clarifies, that sale simply occurs within decentralized protocols.
The graph supports this approach. As the percentage of stored ether plummets, the price does not show an equivalent rebound. The contrast is notable with past episodes in which a similar reduction used to anticipate bullish movements. According to the analyst, the reason is clear: CEXs no longer concentrate the commercial activity of the ecosystem.
3 possible reasons for the decline of ETH on exchanges
The debate about the usefulness of the amount of ETH on exchanges is not new. In an analysis published last September, the CryptoQuant community analyst known as CryptoMe described three possible reasons for the fall of ETH on exchanges.
These were moves towards personal wallets or DeFi; recent purchases immediately removed to self-custody; or a restructuring of internal addresses by exchanges.
According to the specialist, the predominant thesis then was the second, and although she observed a decrease in liquidity, warned that it did not amount to a “supply shock”. This is because “sales absorb purchases,” CriptoNoticias reported.
That analysis was prepared when DeFi activity had a lower weight compared to the market at the end of 2025. It is precisely this structural change that, according to Jrag.eth, makes it insufficient—and even misleading— the interpretation of reserves as a bullish signal.
Jrag.eth clarifies that Criticism of the metric does not imply pessimism about the digital asset. «I am still very optimistic about ETH. But not because of this information,” he said.
The developer maintains that Ethereum’s strength is reflected more in the growth of its on-chain activity than in traditional indicators designed for a less decentralized market.
With a DeFi ecosystem that concentrates more and more liquidity and trading volume, the balance metric on exchanges loses relevance to anticipate price movements. The divergence between the graph and the behavior of ETH confirms a market that operates under new dynamics, where the selling pressure no longer passes exclusively through centralized exchanges.