Ethereum’s 15% Rally Masks a Network Crisis: Exchanges Signal Trouble

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The 15% <a href="https://jpygbp.com/eth-usd/">Ethereum</a> Rally Hides a Network Problem That Just Reached Exchanges

While the price of Ethereum has increased by 15% in the last month, activity on the Ethereum network is actually declining. The number of active users has fallen by 33% since January, and transaction fees (gas) are at their lowest point in two years.

Despite the price going up, trading volume has been decreasing. Also, on May 1st, the market shifted from buying to selling. While the price suggests an upward trend, the overall network activity indicates something else is happening.

Ethereum’s Network Demand Has Quietly Collapsed?

Three structural data points frame the network picture heading into May.

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Ethereum reached its highest level of daily users in January 2026, with 15 million people using the network, according to data from BeInCrypto. By April, that number decreased to 10 million. While a 33% drop over three months might seem significant, the speed of the decline is more important. Even at 10 million users, Ethereum is still performing better than it was during the launch of spot ETFs in July 2024, when daily users averaged between 6 and 7 million. This change in trend is the key takeaway.

Gas fees on Ethereum are currently quite low, averaging around 1 gwei. This is the lowest they’ve been since the beginning of 2024, when they reached a high of 49 gwei. While low gas fees might seem good for users, they actually indicate lower demand for space on the Ethereum blockchain. This reduced demand weakens the system that burns, and thus reduces the supply of, ETH. Fewer transactions mean less ETH is burned, which decreases the deflationary pressure that helps support Ethereum’s price.

Looking at the price chart, Ethereum has been trading in a rising channel since February 6th, with prices consistently increasing. However, trading volume has been decreasing during this same period. This difference between price increases and decreasing volume suggests the rally isn’t as strong as it appears, as fewer buyers are driving the price up. Also, this pattern developed after a significant price drop of around 50% from January’s peak, making it a less reliable indicator of continued gains than a similar pattern would be under different circumstances.

Everything points to one thing: the price of Ethereum is going up, but the network itself isn’t improving at the same rate.

Exchange Flows Just Confirmed What the Network Was Already Signaling

The strongest evidence that problems with the Ethereum network are now affecting its price can be found in Glassnode’s data tracking the net flow of ETH to and from cryptocurrency exchanges. This metric, called Exchange Net Position Change, clearly shows the impact.

Throughout most of April, the data showed a significant net outflow of Ethereum. ETH was consistently being withdrawn from exchanges, indicating a trend of users taking control of their own holdings – a common sign of increased accumulation. By April 28th, these daily withdrawals averaged around 300,000 ETH.

Then it flipped.

Starting May 1st, we saw a change in the net position on exchanges, moving into positive territory. By May 4th, over 60,000 ETH had been deposited onto these exchanges. This shift from people buying and holding to sending tokens to exchanges for sale is a pattern often seen before prices fall. Those who were previously buying throughout April are now starting to sell their holdings.

Looking at past patterns, this situation seems concerning. When Ethereum experienced a similar price increase in July 2024, the price quickly fell by 40% after the launch of spot ETFs. The reason was the same then as it is now: large investments from institutions drove the price up, but there wasn’t a corresponding increase in actual use of the Ethereum network. The number of active users remained steady around 6 to 7 million, and network activity (measured by ‘gas’ fees) was low. As a result, the price increase didn’t last long.

The situation in April 2026 is similar to a pattern we’ve seen before. User activity has decreased significantly since January, gas fees are at their lowest point in years, and trading volume is down. Recent data from exchanges suggests that people are beginning to sell their holdings.

The network gave the warning. The exchanges are now the confirmation.

Ethereum Price Levels Show Where the Rally Has to Prove Itself

Ethereum is currently trading at $2,383, following an upward trend that began on February 6th. This increase comes after a significant drop earlier in the year, when the price fell nearly 49% from $3,407 in January to $1,747 in February. This recent price movement represents a bounce back from that low, rather than a continuation of a previous upward trend.

Ethereum is currently facing a key test at $2,466. If the price closes above this level for the day, it suggests a potential upward trend and could confirm the recent price increase, especially if trading volume picks up. However, if the price fails to close above $2,466, the market is likely to remain constrained, and negative signals from network activity – like user behavior, gas fees, and exchange movements – could lead to further price declines.

Ethereum is currently supported by several key price levels. If the price stays above $2,074.57, it’s likely to remain within its current trading range. However, a drop below $2,074 could lead to a significant decline, potentially reaching $1,831. Further losses below $1,831 could open the door to $1,747 and eventually $1,635.

The current price action shows an imbalance. To move higher, the price needs to convincingly break above $2,466, something it hasn’t shown the trading volume to support yet. If the price falls below the current support level, it could test the lows seen in February. A strong daily close above $2,466 would suggest the selling pressure might be easing, while a close below $2,074 would confirm a bearish outlook.

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2026-05-05 19:26