Ethereum Exchange Supply Hits 2016 Lows Amid Major Fund Exit and $750M Loss

ԵՐԵՎԱՆ (Azat TV) – The Ethereum market is navigating a period of heightened scrutiny and potential instability as its exchange-held supply has plummeted to levels last observed in mid-2016. This significant reduction in available Ether (ETH) comes on the heels of a high-profile $750 million loss by a major investment fund, Trend Research, which unwound a substantial leveraged position this month. The combination of thinning liquidity and a large institutional exit is fueling concerns about unpredictable price movements for the world’s second-largest cryptocurrency.

Trend Research, led by Jack Yi, had constructed one of the largest leveraged Ethereum positions in the market, a $2.6 billion ETH long, primarily using loans from Aave. This aggressive bet on ETH’s upside, amplified by leverage, has now been fully unwound. On-chain data confirmed that Trend Research sold its entire ETH position, raising $1.74 billion to repay outstanding loans, resulting in a realized loss of approximately $750 million. The fund’s wallets reportedly hold minimal assets, indicating a near-complete exit from its Ethereum exposure.

Ethereum Supply Dips to 2016 Levels Amid Market Instability

The unwinding of such a massive position occurred in what market analysts describe as an illiquid environment. According to data from CryptoQuant, the total ETH reserves across all exchanges have fallen to roughly 16 million ETH, a figure consistent with supply levels seen during Ethereum’s nascent stages in 2016. This contrasts sharply with Bitcoin’s (BTC) exchange balances, which have rebounded to around 2019 levels. The current low exchange liquidity, coupled with large players like Trend Research exiting the market, could lead to more volatile price discovery, according to market observers. Ethereum was trading at $2,077 at press time, a significant decline from recent highs near $3,300, representing a fall of approximately 37%.

BitMine Accumulates While Others Exit

Despite the prevailing market fragility and the substantial losses incurred by some, not all major players are retreating. Tom Lee-backed BitMine, reportedly the largest corporate holder of Ethereum, has continued its strategic accumulation. On February 8, the firm added another 20,000 ETH, valued at $41.98 million, according to blockchain analysis platform Lookonchain, citing data from Arkham Intelligence. This latest acquisition moves BitMine closer to its long-term objective of controlling 5% of Ethereum’s total circulating supply, having achieved over 70% of that goal with its 4.29 million ETH holdings. BitMine Chairman Tom Lee has publicly defended the firm’s aggressive buying strategy, arguing that current volatility is “a feature, not a bug” and reiterating his belief that “Ethereum is the future of finance.” Lee has dismissed concerns regarding deepening unrealized losses, noting Ethereum’s history of weathering significant drawdowns.

New AI Agent Standard and Network Usage

Beyond immediate market dynamics, Ethereum continues to evolve its technological infrastructure. A new draft standard, ERC-8004, aims to establish a framework for Artificial Intelligence (AI) agents operating on the Ethereum blockchain. This Ethereum Request for Comment (ERC) defines new data registries for AI agent identity, reputation, and validation, along with a mechanism for third-party feedback. The strategic vision behind ERC-8004 is to foster a marketplace for AI services on the blockchain, potentially driving more traffic to Ethereum. However, experts caution that the adoption of new standards can be a lengthy process, and while increased network usage is observed—with daily transaction counts hitting a record 2,885,524 in mid-January—this does not automatically translate into value accrual for ETH holders. A significant portion of transaction growth now occurs on Layer-2 (L2) networks, which bundle transactions and settle them back to Ethereum, with most fees accruing to the L2 chains rather than directly benefiting Ether coin holders.

The confluence of historically low exchange supply, a significant institutional loss, and ongoing strategic accumulation by major players underscores a complex and potentially volatile period for Ethereum. While fundamental developments like the AI agent standard point to long-term utility, the immediate market is grappling with the implications of reduced liquidity and shifting institutional sentiment, signaling a critical test for ETH’s price discovery mechanisms.