Ethereum's 15% Rise Is a 'Hollow Rally'...Sell Warning Amidst Shift to Exchange Inflows

▲ Ethereum (ETH)

Although Ethereum (ETH) has risen by 15% over the past month, an analysis suggests that network activity and exchange flows are sending bearish signals that differ from the price rebound.

BeInCrypto reported on May 5 (local time) that while Ethereum's price has rebounded by 15% over the past month, on-chain indicators have quietly turned bearish. Ethereum's daily active users peaked at 15 million in January 2026, then decreased to 10 million in April. This is a 33% decrease in three months. BeInCrypto stated that the rate of decrease is more important than the absolute numbers, viewing the reversal in the direction of network demand as a warning sign.

Gas fees also show a slowdown in demand. Ethereum's average gas price has fallen to around 1 gwei, a trend that has seen the lowest levels sustained since early 2024. While low gas fees can be seen as reduced cost burden for users, it also means a decrease in demand for block space. BeInCrypto analyzed that the decrease in activity weakens the EIP-1559 burning mechanism, which reduces the deflationary pressure supporting Ethereum's price.

An unstable structure was also observed in the price chart. Ethereum has been moving within an ascending parallel channel since February 6, but unlike the price increase, trading volume has shown a decline. This means that buying conviction weakened while the price rose, interpreted as a bearish volume divergence. Particularly, the analysis suggests that this channel, formed after a sharp drop of approximately 50% from its mid-January peak, makes it difficult to consider it a typical bullish continuation pattern.

Exchange flows were presented as an indicator confirming network bearish signals. According to Glassnode's exchange net position change, for most of April, ETH moved out of exchanges, indicating accumulation. By April 28, an average of approximately 300,000 ETH per day had moved out of exchanges. However, on May 1, the indicator turned positive, and by May 4, 60,449 ETH had flowed into exchanges. This means that holders have started moving ETH back to places where it can be sold.

BeInCrypto pointed out that a similar structure appeared in July 2024. At that time, Ethereum's price rose due to institutional capital inflow, but network demand did not support it, leading to a 40% drop within days of the spot ETF launch. This time again, with a decrease in active users, low gas fees, reduced trading volume, and a shift to exchange inflows, doubts about the sustainability of the price rebound are growing.

Technically, Ethereum remains within an ascending parallel channel that has continued since February 6. This structure is an attempt at recovery formed after a 48.81% drop from the January high of $3,407 to the February low of $1,747. BeInCrypto analyzed that the rally can only be validated if the daily candle closes above $2,466. If this level is not broken with accompanying trading volume, the bearish network signals are more likely to lead to a price decline.

On the downside, $2,074.57 was presented as a key support level. This level is the Fibonacci 0.236 retracement, serving as a major defense line for Ethereum to remain within the channel. If $2,074 breaks, a downward path could open to $1,831, then to the February low of $1,747, and further to the Fibonacci 0.5 retracement level of $1,635.

Ultimately, Ethereum's current rebound has not been sufficiently validated by price alone. If a breakthrough above $2,466 is accompanied by a recovery in trading volume, the bearish on-chain logic could weaken, but if it falls below $2,074, the slowdown in network demand and the shift to exchange inflows could be confirmed as a full-fledged price downturn.

*Disclaimer: This article is for investment reference only, and we are not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*