Ethereum Bullish Run Might Be Short Term

Ethereum regained momentum, raising its weekly increases to over a third of its value. Still, analysts remain skeptical. Historically, Ethereum’s notable price reductions relative to Bitcoin have signified great purchasing opportunities, as indicated by CryptoQuant. The current scenario is starkly different because of many fundamental concerns. The extent of Ethereum’s total supply stands at an all-time high of 120.07 million, posing a significant problem: the decline of the former deflationary supply narrative. This has been primarily attributed to the Dencun upgrade scheduled for March 2024. It lowered the ETH burn rate and transaction fees, further exacerbating this trend, resulting in renewed inflationary pressure on the ETH market. Moreover, on-chain activity has been dormant for quite some time. This drop is primarily a result of Layer 2 (L2) networks diverting the Ethereum mainnet’s usage, leading to a decline in transactions and unique active addresses since 2021. The rise of L2s has weakened the utility narrative of ETH by diluting demand for base-layer blockchain space, all while scalability has improved. Furthermore, institutional interest in ETH has been waning, according to CryptoQuant. Recent reports indicate that the amount of ETH staked has decreased from a peak of 35 million in November 2024 to approximately 34.04 million now. Since February of this year, ETF holdings have also reduced by about 400,000 ETH, suggesting a decline in investor confidence. The report contrasted the fortunes of the two cryptocurrencies, stating, “Bitcoin is benefiting from strong institutional demand, a capped supply, and ETF-driven inflows.”