Ethereum's 15% Rise is a 'Hollow Rally'...Sell Warning as Exchange Inflow Shifts

▲ Ethereum (ETH)

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

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

Gas fees also indicate slowing demand. Ethereum's average gas price has dropped to around 1 gwei, a trend of the lowest levels sustained since early 2024. While lower gas fees can be seen as a reduced cost burden for users, they also signify decreased demand for block space. BeInCrypto analyzed that reduced activity weakens the EIP-1559 burning mechanism, thereby decreasing the deflationary pressure that supports 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 been declining. This suggests that buying conviction weakened while the price rose, interpreted as a bearish volume divergence. Furthermore, analysis suggests that this channel, formed after a sharp approximately 50% drop from its mid-January peak, is difficult to view as a typical bullish continuation pattern.

Exchange flows were presented as an indicator confirming bearish network 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 holders have begun 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 without supporting network demand, it fell by 40% within days of the spot ETF launch. This time, a combination of decreasing active users, low gas fees, reduced trading volume, and a shift to exchange inflow is raising increasing doubts about the sustainability of the price rebound.

Technically, Ethereum remains within the ascending parallel channel that began on 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 could only be validated by closing a daily candle above $2,466. If this level is not breached 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 range is the Fibonacci 0.236 retracement level, a major defensive 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 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 and a recovery in trading volume accompany it, the bearish on-chain logic could weaken, but if it falls below $2,074, the slowdown in network demand and the shift to exchange inflow could be confirmed as a full-fledged price bearishness.

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