After months of a strong downward trend, Ethereum [ETH] has entered a recovery phase. Thus, the demand for the altcoin is rising again.
In fact, the number of short-term Ethereum investors increased in the past day, reaching a maximum of 4 million.
According to CryptoQuant analyst Burak Kesimci, this is one of the most important aspects of the potential rally for the altcoin.
The increase in short-term investors in Ethereum may enhance the risk appetite for altcoins, especially Ethereum, which is the only digital currency with a spot exchange-traded fund.
Its performance significantly impacts market sentiment and altcoins, making Ethereum a micro-indicator for the rising altcoin market.
Source: X
The rise in the number of short-term investors represents a catalyst for the Ethereum market. Significant price surges often coincide with the number of traders exceeding 4 million, indicating that short-term interest drives these rallies.
The strong demand from new small traders boosts prices, while a decline in numbers below 4 million makes it difficult to maintain upward price trends, often leading to a decrease.
For example, in December 2024, when the number of traders exceeded 4 million, Ethereum prices rose to over $4,000, while in February 2025, the price fell as traders began to leave.
This trend indicates that 4 million traders represent a key threshold for price movements in the short and medium term.
However, the increasing presence of speculative traders raises one concern: Will they stay?
Despite the renewed increase in short-term Ethereum investors, reaching 4 million, the monthly retention rate of the altcoin (digital currency) has steadily declined.
A decline in the retention rate indicates a decrease in the number of returning users monthly after rejoining, leading to decreased user engagement.
Therefore, this represents the main issue facing Ethereum. When these new investors enter the market, they exit it.
Source: Artemis
At the same time, the net flow of Ethereum onto trading platforms rose to 88.2 thousand - the highest level in three weeks - indicating a significant increase in Ethereum deposits on centralized platforms.
This indicates that traders are exiting the market forcefully, as inflows are greater than outflows.
In summary, if the retention rate of digital currencies continues to decline and inflows onto trading platforms persist, Ethereum may lose momentum and decline again significantly.
