Definition ∞ ETH exchange reserves represent the total amount of Ethereum held by centralized cryptocurrency exchanges. This metric provides insight into the supply-side dynamics of Ethereum, indicating the immediate liquidity available for trading. A decrease in exchange reserves suggests that fewer ETH tokens are available for sale, potentially reducing selling pressure and indicating a bullish sentiment. Conversely, an increase can signal an impending rise in selling activity.
Context ∞ The monitoring of ETH exchange reserves is a common practice among market analysts to gauge short-term market sentiment and potential price movements. Significant fluctuations often accompany major news events or protocol upgrades. A critical future development to observe is how the growth of decentralized finance and self-custody solutions might alter the relevance and predictive power of this metric, as more ETH moves off centralized platforms.
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