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The activity within the Ethereum network has doubled over the past year, reaching a record high; however, the price of the token remains nearly 60% below its peak, as noted by analysts from CryptoQuant. They referred to this phenomenon as the “acceptance paradox”: the increase in network usage does not translate into a higher demand for the cryptocurrency itself.
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In February, the number of active addresses on Ethereum surpassed 1.1 million, which is approximately double the figure from a year prior. In March, the volume of ETH transactions reached 1 million, compared to around 750,000 in December. Additionally, transfers of coins via smart contracts and automated protocols have surged to unprecedented levels, according to CryptoQuant analysts.
This growth reflects the advancement of decentralized finance, the proliferation of stablecoins, automated protocols, and second-layer ecosystems, experts explained. The price of Ether currently hovers just above $2000, a level observed during the bearish cycle of 2022-2023.
Julio Moreno, head of research at CryptoQuant, explained the situation by stating that the price dynamics of the token are now primarily influenced by capital flows rather than the growth of network activity, which was the case during the early stages of blockchain development. The annual change in Ethereum’s realized capitalization has turned negative — liquidity is currently leaving the asset, Moreno noted. Investors are increasingly responding to macroeconomic factors and capital movements rather than technological advancements and increased user activity. This indicates that Ether has become a conventional asset for investors, adhering to standard economic principles.
The cryptocurrency market has declined by 44%, losing approximately $2 trillion compared to its peak in October. Many altcoins have experienced a drop of up to 80% in value. This situation has arisen due to a liquidity shortage and cautious investor behavior, which is shifting amid international tensions, CryptoQuant explained.
According to Matt Hougan, the investment director at the crypto asset management firm Bitwise, the market will soon cease to operate under the model where capital flows sequentially from Bitcoin to Ether and then to other projects. In the future, investors are expected to focus more on the fundamental characteristics of projects, particularly those associated with major companies or possessing a stable user base, the executive believes.
