Ethereum is seeing a growing divergence between the level of network activity and spot prices, which suggests that transaction activity alone is not driving demand for Ether.
Ethereum network activity has reached record levels, According to to CryptoQuant, including busy addresses, token transfers, and clever contract invocations.
The total number of busy addresses rose to over 1.1 million in February, more than doubling from the year-ago period, while token transfers topped one million in March, up from around 750,000 in December. According to to CryptoQuant data.
Intelligent contracts and automated protocol token transfers have also reached record levels, reflecting the rise of decentralized finance (DeFi), stablecoins, automated protocols and Layer 2 ecosystems.
Ethereum-2 layer, Lisk research head Leon Waidmann, as well noticed USDC (USDC) usage on Ethereum just hit an all-time high, according to Token Terminal on Wednesday at X.
However, despite network activity, the price of ether (ETH) remains almost 60% below its peak, indicating a “clear disconnect between network utilization and asset performance,” Julio Moreno, head of research at CryptoQuant, said on Tuesday, calling it an “adoption paradox.”
The findings challenge previous beliefs that crypto network activity translates into demand for assets that drive prices higher.
ETH price dynamics driven by capital flows
Moreno added that the annual change in Ethereum’s realized capitalization has become negative, which shows that capital is leaving Ether.
“This closely aligns with ETH price weakness and suggests that ETH price momentum is driven primarily by capital flows rather than growth in network activity.”
Related: Ether Funding Rate Turns Negative: Have ETH Bears Regained Control?
ETH price is in deep bear territory
Ether is currently trading at just above $2,000, consolidating slightly above the levels it held for over a year during the 2022-2023 bear market.
But it’s not just Ether that’s suffering, as the broader cryptocurrency market is down 44%, or about $2 trillion, from its October peak.
Many altcoins are down 80% as a result of a liquidity drought, amplified by a risk-free investment environment due to ongoing geopolitical conflict.
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