On paper, Ethereum looks like the healthiest blockchain on the planet right now. However, the network is booming because everyone is rushing for the exits.
According to the latest on-chain data from analytics firm CryptoQuant, the Ethereum network is currently processing an unprecedented volume of traffic.
Key metrics such as active addresses, token transfers, and smart contract calls have even managed to eclipse the euphoric peaks of the 2021 bull market.
The spot price of Ethereum (ETH) is currently down more than 50% below its highs.
The illusion of network growth
High network activity does not automatically equal high demand to buy the asset.
Right now, the Ethereum blockchain is experiencing a surge in transactions simply because investors are aggressively moving their capital.
Users are interacting with smart contracts to unwind decentralized finance (DeFi) positions, unstake their assets, and transfer tokens to exchanges.
CryptoQuant’s analysis reveals that periods of high ETH inflows to centralized exchanges (relative to Bitcoin) coincide perfectly with sharp declines in the ETH/BTC price ratio.
This essentially proves that a significant portion of this record network activity is simply investors moving their ETH to exchanges to sell/.
The one-year change in Ethereum’s realized capitalization has turned negative, according to the most recent data.
Realized capitalization measures the total value of all tokens at the price they were last moved. This means that realized capital is exiting the asset.
Ultimately, the data shows that Ethereum liquidity is evaporating.
Dan Burgin
Vladislav Sopov
