Ethereum: A Deep Dive In Network Activity

Summary Ethereum’s price has declined by 50% over the last 90 days, despite a significant increase in the total market capitalization of cryptocurrencies. Key metrics like TVL, daily active addresses, and transactions show strong network activity, indicating sustained user interest and potential for price recovery. Gas fees have decreased post-PoS transition, impacting revenue; the upcoming Pectra update may address this by allowing larger validator stakes, potentially reducing supply. The Pectra update on May 7 could lead to a price increase by enabling validators to stake more efficiently, reducing circulating supply and improving network efficiency. Introduction In this article, we will analyse what has happened on the Ethereum (ETH-USD) network and what implications these events have had on the price level. We will also provide a future outlook for the asset price, supported by data and the new Pectra update. Ethereum has declined over the last 90 days by 50% to USD 1500, coming from USD 3000 and higher levels. Its last ATH (All-Time High), located at 4880 USD, dates back to November 10, 2021. This is really strange, as in similar assets we have seen price peaks in much more recent times (See Bitcoin (BTC-USD) or Ripple (XRP-USD) in early 2025). ETH Price (TradingView) Looking at it from the point of view of the total market capitalisation of cryptocurrencies, we can see that this value has increased in the last quarter of 2024 by 63.52%. Of this 63.52% increase, 54.77% corresponds to an increase in Bitcoin’s market capitalisation, as can be seen in the following image. Consequently, 45.23% or 736.74 billion USD flowed into the so-called altcoins at that time. Considering that Ethereum is the most representative asset of the altcoins, that it did not reach a new high at the beginning of this cycle seems surprising. I will try to put a face to the reason for this. Cryptocap Evolution (TradingView) Analysis: Network View TVL We can see in the following graph the evolution of the TVL (Total Value Locked) in a native asset, deployed in the Ethereum network, over time. It can be seen that the TVL is at a peak, even though the price has fallen in recent months. To me, this is a good sign, as there continues to be a strong commitment from validators to block/stake their coins to validate transactions and secure the network. We also note the green and red bars, which represent monthly increases/decreases in LTV greater than or equal to 15%. It is quite noticeable that when such increases/decreases occur, the price rises or falls accordingly. So this variable represents an important bid attraction and bid blocking mechanism. The more ETH there is staked, the less liquid supply is available on the exchanges and the more likely there is to be a supply contraction caused by an increase in demand. TVL Data (Node Analytica) Daily Active Addresses – App Activity At this point, we analyse the evolution of the active addresses of the Ethereum network, disaggregated by applications. In the shape of the graph, we can see a clear harmony between the growth of addresses and the growth of the price. The Pearson statistic explains this at 0.8. While it is true that the price of the asset has decreased, the active addresses have remained fairly stable in recent times, with some downward variations. ETH Addresses Data (Node Analytica) Therefore, we also analyse what happens when there are monthly increases/decreases of more than 20% in the daily active addresses. We see that when there is an increase of this magnitude, the price generally follows the addresses. This is mainly because these new addresses demand the native asset in order to be able to perform the operations they want on the network itself. From my point of view, I think this is an important variable to take into account and monitor (it can be done in applications such as Artemis Crypto), as it clearly shows us the real use of the network. ETH Addresses Data (Node Analytica) Transactions – App Activity Another of the variables we analysed is the number of transactions carried out on the Ethereum network, represented in a disaggregated way by category of applications. As with the active addresses variable, from the shape of the graph, it seems that when the number of transactions carried out on the network increases, the price of the asset also increases. This is because the two variables have a correlation of 0.81 using Pearson’s correlation coefficient. ETH Tsnx Data (Node Analytica) This second graph represents the set of total transactions vs. price over time. Reflecting monthly increases of more than 15% in the number of transactions in the green bars and decreases of the same size in the red bars. In some phases, increased transactions are accompanied by an increase in price, which we determined to be an important variable to monitor. In the end, the pairing of active addresses and transactions reflects user interest and activity in any given network. ETH Tsnx Data (Node Analytica) Gas Consumed ((USD)) – App Activity In this section, we analyse the variable that I consider most important, the gas or fees in USD generated in aggregate by the total number of applications running on the Ethereum network, which corresponds to the revenue of the Ethereum Protocol. As the reader may recall, on 15 July 2022 Ethereum changed its consensus mechanism from Proof of Work (PoW) to Proof of Stake (PoS). One of the main reasons for this change was to be able to lower transaction fees (Gas) to make the network more competitive and thus attract users who will compensate for this reduction. Well, as can be seen in the following graph, this has not been fulfilled in any way. The level of users has remained almost constant and the protocol fees have been drastically reduced. This is also due to the emergence of layer 2 networks that take advantage of Ethereum’s infrastructure ((EVM)) without ‘paying’ the fees that would be fair at the moment. I believe that Ethereum needs to achieve a fair level of revenue for everyone who has an indispensable need to use its technology infrastructure. Right now, it is failing to do so and that is why there has been a drop in its price. ETH Gas Consumed Data (Node Analytica) Below, we can see the total gas consumed by all the applications running on the Ethereum network. As can be seen, the historical maximum of Ethereum coincides with the historical maximum in terms of Gas Consumed, this is completely normal, as it reflects pure demand for the protocol. It can also be seen that the vast majority of green bars (monthly increases in gas consumption of more than 70%) coincide with local price peaks. It is quite possible that Ethereum will achieve this with the new ‘Pectra’ update, which will be implemented on 7 May, but it is only a possibility. ETH Gas Consumed Data (Node Analytica) Conclusion In this last graph, we analyse the historical price of Ethereum vs the percentage of the circulating supply, which is in staking, blocked by the different validators of the network. We do this because I think it can help us to unravel the future. As we discussed earlier, on 7 May 2025, in just under a month, the Ethereum network will implement Pectra, the most important upgrade since Dencun (2024). One of the relevant points of this update is EIP-7251 which states; ” This EIP increases the maximum balance of validators from 32 ETH to 2048 ETH. This allows validators to staking larger amounts more efficiently. It also reduces the number of validators needed, which decreases the network load and improves the efficiency of the blockchain. ” As can be seen in the chart below, if validators start depositing 2048 ETH instead of 32, it could result in a circulating supply contraction. Doing some quick maths 2048 is 64 times more than 32, which could raise the percentage of staking locked asset over circulating supply, which could translate into a price increase of the asset. ETH Staking Data (Node Analytica) In the short term, after the successful implementation of Pectra, I believe Ethereum has the potential to increase in value. For the medium term, the protocol should be able to better capture revenue from anyone using its technology stack.

Source: Seeking Alpha