Ethereum is undergoing a historic supply squeeze as an increasing amount of its total supply gets locked in staking mechanisms. This drop in Ethereum available on exchanges comes alongside significant price movements and longer-term relative value trading strategies seen in institutional clients.

As we’ve seen with Ethereum steadily leaving exchanges, this could be a precursor to a growing positive supply shock. Today, 29.03% of the total Ethereum supply is staked. This drop greatly restricts the supply of coins available for purchasing and trading. With Ethereum having a circulating supply of about 121 million ETH, such scarcity in the face of growing demand could shift price pressure.

Last Friday, a massive 140,120 ETH left centralized exchanges— worth about $393 million.

More than 140,000 ETH, worth roughly $393 million, flowed out of exchanges, marking the largest single-day withdrawal in over a month. - Sentora

Ethereum leaving exchanges is indicative of the increased behavior towards long-term holding or staking. This unexpected trend adds even more pressure to the already-tight supply.

The value of Ethereum recently regained the $3,000 level even after suffering its biggest loss since the beginning of 2025. This massive volatility has helped both crypto derivative exchanges and institutional traders to find opportunities for sophisticated technical strategies.

As things stand, short, leveraged positions on Ethereum have hit an all-time high of -13,291 in aggregate OTC and cash contract shorts. This last phenomenon is a result of the “basis trade.” Real money is already implementing this strategy to make money on price differences between Ethereum spot markets and CME futures.

Reason for the huge ETH shorts is basis trade. Funds can capture an annualized basis of 9.5% by shorting the CME futures and buying ETH spot with a staking yield of 3.5% (this why its mostly ETH not BTC) for a delta neutral 13%. - Fejau

In a basis trade, you short CME futures contracts at a market to lock in your basis. Simultaneously, you purchase Ethereum on the spot market to profit from the price spread. The staking yield of 3.5% serves to incentivize Ethereum as a holding vehicle, further boosting its attractiveness for this kind of trade. Although this strategy can be delta neutral and produce positive returns of 13%, it is still open to acute market volatility.

Ethereum’s price is currently 38% lower than its all-time high. Of course, that peak was nearly reached back in November 2021.