After a relatively stable April marked by reduced demand on the network and sideways price movement, the second-largest cryptocurrency, Ethereum (ETH), may be ready for changes.
ETH holders are optimistic about May. This optimism is fueled by strengthening fundamentals, the anticipated Pectra upgrade, and renewed interest from institutional investors due to spot ETFs on ETH.
ETH faced difficulties in April, but May brings a ray of hope.
In April, on-chain data showed a decline in user activity on the Ethereum network, while the overall market stagnation kept ETH trading below key resistance levels.
According to Artemis, over a 30-day period, user demand for Ethereum sharply declined, leading to a decrease in active addresses, daily transaction volume, and consequently, a reduction in network fees and revenues.
This, along with the overall market downturn, impacted ETH's performance, causing the price of the leading altcoin to remain below the $2,000 mark throughout April.
However, in an interview with BeInCrypto, Gabriel Khalm, a research analyst at IntoTheBlock, noted that the price of ETH could exceed the $2,000 mark in May and stabilize above it.
For Khalm, improved capital flows into spot ETFs on ETH, Ethereum's dominance in the decentralized finance (DeFi) vertical, and its upcoming Pectra upgrade could contribute to the realization of this scenario.
ETF inflows, DeFi dominance, and Pectra: a triple boost for Ethereum in May
According to SosoValue, monthly net inflows into ETH ETFs amounted to $66.25 million in April, indicating a shift in market sentiment compared to the $403.37 million in net outflows recorded in March. This reversal from significant outflows to moderate inflows suggests that investor confidence in the altcoin is gradually returning. This indicates that institutional players may be preparing for a long-term recovery, especially as Ethereum's network fundamentals begin to improve, one of which is its growing dominance in the DeFi sector.
Over 50% of the total locked value (TVL) in DeFi protocols is still on the Ethereum blockchain. This indicates that layer-1 (L1) remains the predominant layer for settlements for various financial applications, including lending, staking, yield farming, and decentralized exchanges. Therefore, in May, if overall market conditions begin to improve, renewed capital flows into Ethereum's DeFi sector could, in turn, increase demand for ETH and support its price growth.
Additionally, according to Khalm, the upcoming Pectra update for Ethereum, scheduled for May 7, 2025, may further contribute to ETH's price performance this month. The upgrade promises to enhance network scalability, reduce transaction fees, improve security, and introduce smart account functionality.
These improvements could stimulate user demand growth throughout May, potentially increasing the price of ETH, provided that macroeconomic conditions remain favorable.
ETH Growth Depends on Broader Market Stability
Despite this, broader economic pressures pose a significant risk to ETH in May. Khalm noted that the "upcoming CPI report on May 13 will be particularly important, potentially influencing market sentiment and contributing to this volatility."
This is because inflation or hawkish signals from the U.S. Federal Reserve could worsen risk-off sentiment in the crypto market, putting pressure on the price of ETH.
Khalm also noted that the price of ETH remains closely tied to U.S. stocks. Therefore, if stock markets face stress again this month due to inflation fears or expectations of rate hikes, the altcoin may experience similar pressure. While a sustained rise above $2,000 remains possible, any increase will likely depend on inflation trends, risk sentiment in traditional markets, and how closely ETH remains correlated with stocks.#Write2Earn #BinanceSquare #crypto #trading #Binance $ETH