Ethereum has seen a widening discrepancy between the level of activity on the network and the spot price, suggesting that trading activity is not the only driver driving demand for Ethereum.
According to CryptoQuant, Ethereum network activity, including active addresses, token transfers, and smart contract calls, is at an all-time high.
The total number of active addresses soared to more than 1.1 million in February, more than double the same period last year, and the number of token transfers rose from around 750,000 in December to more than 1 million in March, according to CryptoQuant data.
Smart contract and automated protocol token transfers are also rising to record levels, reflecting the growth of decentralized finance (DeFi), stablecoins, automated protocols, and layer 2 ecosystems.
Leon Weidman, head of research for Ethereum Layer 2 Risks, also spoke to Circle on X on Wednesday. $USDC ($USDCAccording to Token Terminal, usage on Ethereum just hit an all-time high.
However, despite network activity, the price of Ether ($ETH) is still down about 60% from its peak, indicating “a clear disconnect between network usage and asset performance,” Julio Moreno, head of research at CryptoQuant, said on Tuesday, calling it the “adoption paradox.”
This finding casts doubt on the previous notion that activity in cryptocurrency networks leads to demand for assets that causes price increases.
$ETH Price trends caused by capital flows
Moreno added that the annual change in Ethereum’s realized market capitalization has turned negative, indicating an outflow of capital from Ethereum.
“This is very consistent with $ETH The weakness of the price is $ETH Price trends are primarily driven by capital flows rather than growth in network activity. ”
Ethereum has achieved a one-year cap change. Source: CryptoQuant
Related: Ether funding interest rate turns negative: $ETH Will the bears regain control?
$ETH Prices are in bear territory
Ether is currently trading at just above $2,000, slightly above the levels sustained for more than a year during the 2022-2023 bear market.
But Ether is not alone in suffering, with the overall cryptocurrency market down 44%, or about $2 trillion, since its peak in October.
A liquidity drought has seen many altcoins fall by 80%, further amplifying the risk-off investment environment due to ongoing geopolitical conflicts.
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