• ETH L1 network activity remained sluggish, but L2 traction bounced 50% post-Pectra upgrade. 
• Mid-term ETH market positioning was bullish despite the short-term risk of profit-taking. 

Ethereum [ETH] network activity has not strongly recovered despite the successful Pectra upgrade. According to Glassnode, the upgrade has not yet drawn in new or returning users.

Interestingly, existing users were sticking around for longer, as reflected by the lower churn rate (-8.5%), the analytics firm added.

“Since the upgrade, the average new and resurrected addresses are down in comparison to YTD values (–1.8% and –8.4% respectively) – but churn is notably lower as well (–8.5%).”

However, L2 activity across Base, Arbitrum One, and OP Mainnet bounced back nearly 50% in May, from 8.7 million users to 13 million active addresses. 

Despite the sluggish L1 network activity, ETH capital inflows surged by $3.8 billion after the upgrade, as realized cap growth showed. 

Glassnode added that the Realized Cap (total capital stored in the asset) broke its Q1 downtrend, marking renewed investor interest in the altcoin in Q2. 

If the trend continues, the ETH price could be primed for an extra uptrend. This bullish outlook was also supported by an impending supply shock on exchanges. 

Notably, ETH supply on exchanges has dropped to a 10-year low below 5%, Santiment data showed. 

“Ethereum has under 4.9% of its supply on exchanges for the first time in its 10+ year history.”

There were 15.3 million fewer ETH on exchanges, underscoring a strong accumulation trend. This meant reduced sell pressure and potential supply crunch, a perfect set-up for an explosive run-up if demand accelerates. 

However, there was increased profit-taking from the Q2 recovery gains, which could lead to a brief cool-off in the rally in the short term. 

But market positioning remained bullish since late April and in the mid-term.

According to Options data, 25 Delta Skew was negative for the 1-week (-3.5%)and 1-month period (-4%), suggesting higher demand for calls (bullish bets) than puts (bearish bets). 

Simply put, the market was pricing in a higher chance of a likely upward rally for ETH. At press time, ETH traded at $2.5K, about 60% from its current cycle high of $4K.