Onchain analytics firm CryptoQuant is cautioning investors about Ethereum’s outlook as network activity hits new highs but prices continue to underperform. CryptoQuant, headquartered in Seoul and known for its blockchain data research, specializes in analyzing digital asset onchain trends for institutional and retail clients.
Network Activity Contrasts With Price Decline
Daily active addresses on Ethereum surged to an all-time high last month, surpassing participation seen during the 2021 bull market. Despite this increase in network adoption, the price of ETH has fallen over 50% from its recent cycle peaks, reflecting a widening disconnect between user engagement and asset valuation.
CryptoQuant characterized this divergence as an “adoption paradox,” noting that previous cycles saw user growth correlating with price surges. The current market, however, shows price trends breaking away from traditional onchain metrics, and higher network usage has not prevented price declines.
Internal Contract Calls Hit Record Highs
The analytics firm detailed a sharp rise in smart contract activity, with decentralized applications and Layer 2 solutions fueling record numbers of internal contract calls. These automated transactions occur within protocols, validating growth across decentralized finance and scaling networks.
Despite this technical growth, CryptoQuant’s analysts observed a change in the historical pattern linking smart contract activity to ETH price appreciation. In the past, heightened contract volumes often accompanied price rallies. Currently, increases in transaction counts are not translating into upward price movement.
CryptoQuant has reported that the old dynamic between smart contract usage and gains in ETH value has weakened. In this environment, a surge in onchain operations has not reversed downward momentum.
Exchange Flows and Capital Outflows Add Bearish Pressure
The firm identified rising ETH inflows to exchanges as a leading indicator of increased selling pressure. Exchange deposits often precede liquidation, and compared with Bitcoin, ETH has experienced a greater ratio of such inflows. This suggests that Ethereum holders may be preparing for more significant sales in the short term.
Julio Moreno, CryptoQuant’s head of research, presented a scenario in which ETH could reach $1,500 if current market trends continue. This potential downside was linked to ongoing bearish conditions and pronounced selling sentiment, with Moreno pointing to the late third or early fourth quarter as a time frame for such levels if trends persist.
Another core metric from CryptoQuant is the one-year change in Ethereum’s realized capitalization, which has turned negative—indicating more capital leaving than entering the Ethereum market over the last year. This weakening investor demand signals continued challenges for price recovery.
According to Moreno, reversing this decline will require a shift in flows:
“We need to see positive capital inflows and lower exchange inflows for ETH to exit the bear market.”
ETH’s price recently traded around $2,070, a marginal increase of 0.5% over the previous 24 hours.
