CryptoQuant says ETH could fall to $1,500 amid Ethereum's 'adoption paradox'

Ethereum may face further downside as it faces an "adoption paradox," a growing disconnect between network adoption and ether's price performance, according to onchain analytics firm CryptoQuant.

ETH could fall to around $1,500 "if the bear market continues," CryptoQuant’s head of research, Julio Moreno, told The Block. He said that level could occur by the end of the third quarter or the beginning of the fourth quarter this year if market conditions do not improve.

Ethereum's 'adoption paradox'

CryptoQuant said daily active addresses on Ethereum reached an all-time high last month, surpassing levels seen during the 2021 bull market. At the same time, ETH has fallen more than 50% from its recent cycle highs, marking a reversal from previous market cycles when rising network activity coincided with stronger price performance.

The divergence extends beyond user growth. Activity generated by smart contracts and automated protocols has also surged, CryptoQuant said, with internal contract calls reaching record highs last month as decentralized finance, stablecoins, and Layer 2 networks expand across the Ethereum ecosystem. Internal calls occur when smart contracts automatically execute transactions within decentralized applications.

"The historical relationship between smart contract activity and ETH price has deteriorated," CryptoQuant said. "In earlier cycles, ETH price showed a clearer positive relationship with contract-driven activity, with higher transfer counts coinciding with rising prices."

With that divergence, exchange inflows provide a clearer signal for ETH price dynamics than network activity metrics, because they capture capital moving toward potential selling venues, according to CryptoQuant.

"The elevated ratio of ETH exchange inflows relative to bitcoin suggests stronger relative selling pressure on ETH, helping explain its underperformance against BTC," CryptoQuant said.

The firm also pointed to weakening investment demand. The one-year change in Ethereum’s realized capitalization, a metric that tracks net capital entering or leaving the asset, has recently turned negative, CryptoQuant noted. That shift suggests capital is exiting the network even as onchain activity continues to grow.

"We need to see positive capital inflows and lower exchange inflows for ETH to exit the bear market," Moreno told The Block.

ETH was trading at around $2,070 at the time of writing, up about 0.5% over the past 24 hours.