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Ethereum ($ETH) was among the altcoins most affected by the major crash last week. While the $ETH price fell below $2,000, data shows that on-chain network activity is increasing.
According to analysts, this situation raises the possibility that the market may have entered a “capacity” phase.
In their latest report, CryptoQuant analysts noted an increase in network activity while the Ethereum price was falling. This increase raised the possibility of another phase of selling pressure.
“As the Ethereum price dropped from around $3,000 to approximately $2,000, ERC-20 token transfers increased sharply. The 14-day moving average (SMA-14) of total token transfers rose from approximately 1.6 million on the 29th of last month to 2.75 million as of the 7th of this month, reaching its highest level since August last year.”
According to analysts, this situation in Ethereum is a typical inconsistency phenomenon where a rapid increase in fund movements on the network occurs simultaneously with a price drop, indicating a full-scale shift in investor behavior.
Analysts explained this surge in token activity as “investors may have liquidated risky assets and converted them into stablecoins during the price drop, or transferred their funds to exchanges for liquidation.”
Analysts, pointing out that this negativity could actually be a good sign for Ethereum, said that the increase in token transfer activity could signal the exhaustion of excessive selling pressure and the formation of a local bottom, but the possibility of further volatility should also be considered.
Possibly a Correction Signal!
In addition, CryptoQuant analyst Amr Taha stated that $ETH funding rates are overheating, signaling a potential correction.
According to the analyst, the Ethereum funding rate on Bitmex has become significantly positive, entering an overheating phase. In contrast, the $ETH funding rate on Binance has shifted from negative to neutral.
The analyst notes that historically, high funding rates resulting from excessive leverage have increased the risk of a short-term correction rather than signaling a sustainable upward trend.
“While $ETH funding on BitMEX experienced an extremely positive surge, funding on Binance, which was negative, became neutral.”
Historically, strong positive funding driven by leverage has not supported sustainable upward movements, but instead increased the likelihood of sharp corrections.
*This is not investment advice.