Ethereum Remains Strong Following 29% Rally

Strong TVL, Weak ETF Demand

Despite market hesitancy, Ethereum’s fundamentals remain solid. The network has undergone multiple layer-2 scaling upgrades, making it more efficient and secure.

This massive disparity underscores Ethereum’s dominance in terms of decentralization, developer adoption, and protocol security.

Source: Farside Investors

Perhaps the most troubling sign for ETH bulls is the lack of interest in U.S.-listed Ether spot ETFs. According to data from Farside Investors, May 8th saw net outflows of $16 million, despite ETH posting its strongest single-day gain in over four years.

This marked the third consecutive day of net outflows, indicating that even institutional investors are wary of jumping back into Ether amid regulatory uncertainty and declining network activity.

Pectra Upgrade

On May 7th, 2025, Ethereum successfully deployed the highly anticipated Pectra upgrade. This update, the largest hard fork since last year’s Merge, brings with it 11 Ethereum Improvement Proposals (EIPs) aimed at enhancing various aspects of the Ethereum ecosystem.

These changes are set to improve staking, boost scalability, and streamline the user experience, laying the groundwork for future innovations like Fusaka. Perhaps more importantly, ETH holders remain hopeful that the update can finally turn things around for the world’s second biggest cryptocurrency by market cap.

Network Usage Drops, Hurting ETH Demand

Another factor weighing on ETH demand is a steep 85% drop in Ethereum network fees between January and April. Lower fees may seem beneficial to users, but they signal reduced on-chain activity, which in turn hurts staking yields.

Ethereum’s fee burn mechanism relies on active usage. When fewer transactions occur, less ETH is burned, weakening the asset’s deflationary model and diminishing its appeal to long-term holders and stakers.

In addition, political factors could also influence market sentiment. President Donald Trump has adopted a pro-crypto stance for his current run in office, but this has mainly been for Bitcoin and not much else. Ethereum and other altcoins may suffer due to a lack of support from the top.

Trump Walks Back Support for Altcoins

Building on what was said earlier, Ether’s fortunes could shift due to recent developments in the U.S. political landscape. On May 8th, Politico reported that President Donald Trump had severed ties with a crypto lobbyist who had floated the idea of a “strategic digital asset reserve.”

Previously, Trump had mentioned Solana, Cardano, and Ripple by name in a March 2nd social media post. However, his tone was far more measured in a subsequent March 6th executive order regarding digital asset policy.

If Trump, as well as potentially other policymakers, begin favoring Ethereum over competing chains, it could serve as a catalyst for renewed institutional interest in ETH.

Is A Move To $2,700 Still Possible?

Despite weak ETF flows and neutral derivatives sentiment, the technical picture for ETH is still constructive. If broader market sentiment improves and Ethereum regains narrative dominance, a push toward the $2,700 level remains entirely plausible.

This scenario becomes even more likely if competing chains struggle to gain political traction or fail to demonstrate long-term scalability and decentralization.

Source: laevitas.ch

In conclusion, Ethereum’s recent 29% surge is undoubtedly impressive, but the broader market remains cautious. Neutral derivatives positioning, ETF outflows, and declining network usage all suggest that investor confidence hasn’t fully returned.

However, Ethereum still leads the pack in core fundamentals. If sentiment shifts, politically or institutionally, ETH could be poised for its next major breakout.