The Ethereum network is experiencing its most active phase to date. However, this does not necessarily indicate an optimistic outlook. Recent on-chain data reveals that Ethereum has reached an important milestone, with the transfer count hitting a historic record. In the past, similar signals have not always resulted in positive performance for prices.
Additionally, a significant increase in inflows to exchanges raises concerns that selling pressure has not yet been overcome.
How does the current situation of Ethereum compare to 2018 and 2021?
In early February, data from CryptoQuant shows that Ethereum Transfer Count — that is, the total number of token movements — calculated by a 14-day moving average, reached a record level of 1.1 million.
At first glance, this number seems positive. It indicates consistent network growth and broader adoption of Ethereum.
However, a detailed analysis suggests that this data may not be the bullish indicator the market anticipated. The movement may signal a corrective phase or even mark a cyclical peak in prices, as seen in previous events.
Analyst CryptoOnchain from CryptoQuant highlights two instances where increased activity on the Ethereum network preceded market peaks.
On January 18, 2018, during the peak of the ICO boom, Ethereum transactions surged. Shortly after, ETH fell from around $1,400 to less than $100 by the end of the year. This drop dragged the entire crypto market into a 'crypto winter' that lasted two years.
On May 19, 2021, amidst the significant growth of DeFi and NFTs, the metric reached a new record high. Subsequently, the market reversed sharply, with ETH retreating from over $4,000 to less than $2,000.
The reason is straightforward: increased ETH movement generally indicates that more investors are withdrawing funds from wallets in significant transactions. This behavior may demonstrate attempts to sell in light of worsening future expectations.
"The current scenario bears striking similarities to structures observed in 2018 and 2021. Although the macroeconomic environment is distinct, the on-chain behavior of participants suggests we are in a high-risk zone," stated CryptoOnchain, an analyst at CryptoQuant.
This assessment is reinforced by the sharp increase in the Ethereum Exchange Inflow (Top 10) indicator after ETH retreated from $2,300 in early February.
The Ethereum Exchange Inflow (Top 10) measures the volume transferred in the ten largest ETH inflows to exchanges. High data indicates an increase in the number of investors depositing large sums at once. This pattern often points to selling pressure and potential continuation of declines.
On February 3, this indicator jumped to 1.3 million, the highest level in twelve months. Two days later, ETH fell from $2,230 to less than $2,100.
According to an analysis by BeInCrypto, a trend reversal would only be confirmed if Ethereum recovers to at least $3,000. In the short term, ETH may continue to fall towards support at $2,000, as selling pressure persists.
The article 'Ethereum network activity spikes, but that doesn't guarantee a price increase' was first seen on BeInCrypto Brazil.