[Analysis] "Ethereum network activity hits all-time high…price decouples"

An analysis has found that Ethereum (ETH) prices and network usage are showing signs of decoupling.

On-chain analytics firm CryptoQuant said in a weekly report on the 10th (local time) that "Ethereum network activity has recently reached an all-time high, but the price of Ethereum has instead fallen sharply." CryptoQuant noted that "key on-chain indicators such as (Ethereum’s) active addresses, token transfers and smart contract calls posted record highs last year," adding that "Ethereum’s price has fallen more than 50% from its recent peak, highlighting a clear divergence between network usage and asset prices."

CryptoQuant pointed out that "user participation continues to increase despite Ethereum’s price weakness." It added that "(Ethereum’s) number of daily active addresses has risen to levels surpassing the previous peak recorded during the 2021 bull market," saying this "shows that adoption and participation in the Ethereum ecosystem are steadily expanding." CryptoQuant also said that "internal contract calls and token transfers have climbed to all-time highs," adding that this is "interpreted as a result of expansion across DeFi, stablecoins and the Layer 2 ecosystem."

However, the analysis suggests that prices are driven by ‘capital flows.’ CryptoQuant said that "Ethereum’s price is more sensitive to capital flows than network activity," adding that "the recent shift of Ethereum’s 1-year change rate in realized capitalization into negative territory is also a signal of weakening investment demand." It continued, saying, "this also means capital is flowing out of Ethereum," and that "ultimately, the main factor moving Ethereum’s price is capital inflows and outflows—not network usage—and prices still appear to be determined by changes in money flows."