Ethereum‘s ongoing bullish action hasn’t fully faded yet as the general crypto market builds momentum. While Ethereum’s price has displayed a brief surge, the network continues to show weakness in user engagement, even with recent key updates meant to boost the network’s performance and appeal.
On-Chain Engagement With Ethereum Lagging
A leading on-chain data analytics platform, Glassnode, shared a recent worrying report about the Ethereum network. ETH’s price may have displayed signs of resilience in the midst of ongoing market fluctuations, but the network activity tells a different story.
Glassnode has revealed a persistent, weakened performance in ETH’s on-chain activity, raising concerns about whether its core ecosystem is losing momentum. This consistent lack of network activity occurs despite ongoing positive narratives and upgrades.
According to the on-chain platform, the latest key updates, like the Pectra upgrade, have been unable to ignite activity on the network. “Ethereum’s Pectra upgrade hasn’t translated into a spike in network engagement just yet,” the platform stated.
It is worth noting that the Pectra Upgrade was officially launched in early May, with the purpose of bolstering ETH’s network’s scalability and efficiency. The upgrade consists of two synchronized updates: The Prague execution layer hard fork and the Electra consensus layer upgrade.
Glassnode stated that user attrition has decreased, and the Pectra Upgrade still has not increased the number of new or returning users after analyzing the ETH Month-over-Month activity Retention metric. Data from the on-chain platform shows that the average count of new and revived addresses has decreased since the upgrade compared to year-to-date (YTD) values.
ETH’s average new addresses have decreased by about 1.8%, whereas resurrected addresses have declined by 8.4% during this period. Additionally, user churn has witnessed an approximately 8.5% drop in the same time frame. Thus far, Glassnode noted that it remains to be seen whether this is a result of the network upgrades or more general cycle trends.
A Breakout After A Short-Term Correction
Even though network activity has weakened, it does not fully hinder ETH’s price from experiencing a rally. On-chain expert and author ShayanMarkets has predicted an impending breakout to the upside as the Ethereum market overheats near the $2,500 mark. However, a short-term correction is likely to take place before the breakout.
Using a bubble chart that illustrates the total trading volume across all crypto exchanges, the expert highlighted that an overheating scenario, marked by a notable spike in trading volume, has resulted from ETH’s approach to the $2,500 resistance level, now acting as a support level.
This spike is mainly triggered by profit-taking and the available resting supply at this key zone. Furthermore, the overheated situation suggests a probable short-term drop as the market cools and makes room for fresh accumulation. While the altcoin has surpassed $2,500, Shayan’s analysis noted that this move is probably driven by fresh demand.
Featured image from Getty Images, chart from Tradingview.com
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