So far, 2023 has been a good year for Ethereum ETH 0.42% (ETH) as it rises alongside other cryptocurrencies. Currently, ETH is trading near $1,650, up 40% from the start of the year. However, it may be too early to conclude that a new bull market has started and that the cryptocurrency will be able to reach an all-time high of $4,800 later this year. Three key on-chain metrics that typically rise during aggressive bull markets remain very depressed, leading some experts to warn against over-optimism.
Daily Transactions Suppressed
The number of daily transactions on the ethereum network remains below last year’s levels, according to data provided by crypto analytics firm The Block. The 7-day moving average (DMA) of daily transactions was just over 1 million, well below the all-time high of about 1.65 million in 2021. A surge in trading volume could be a leading indicator of higher ETH prices, but that hasn’t happened yet.
Active Addresses Dry Up
The number of daily active addresses, or the number of addresses interacting with the ethereum blockchain, was also below year-ago levels. The 7DMA for active addresses is around 400,000, down from an all-time high of around 750,000 in 2021. A rise in the number of active addresses tends to coincide with a rise in the price of ETH. A surge in active addresses could indicate that ether is about to rise, but that hasn’t happened yet.
Address Growth Remains Subdued
According to data provided by The Block, the creation of new addresses on the ethereum network is slow and below year-ago levels. The 7-day moving average was around 67,000, compared with about 80,000 in the same period last year. As in 2017/2018 and 2021, the rate of creation of new addresses will generally increase in line with the price of ETH.
Despite the recent rise in ETH prices, experts are urging investors to remain cautious. While an upcoming ethereum blockchain upgrade in March may provide support for further price gains, three key on-chain indicators threaten to hinder this outcome. Therefore, the bears may have the upper hand for now.
ETH bulls should also take into account the overall cryptocurrency market environment, which is currently characterized by heightened regulatory scrutiny, especially when it comes to stablecoins, non-fungible tokens, and decentralized finance. Additionally, some central banks are developing their own digital currencies, which could pose a threat to cryptocurrencies such as Ethereum.
Despite the challenges, ethereum remains one of the most popular and valuable cryptocurrencies, with a market cap of over $200 billion. Furthermore, the cryptocurrency has proven resilient in the face of regulatory pressure and other external factors and continues to be favored by investors.
