Ethereum has shown renewed strength following the recent Pectra upgrade, with on-chain data signaling a $3.8B capital inflow. However, technical indicators suggest that the market may be overheating as ETH flirts with the psychologically crucial $2.5K level.
Realized Cap Rising
On-chain data from Glassnode reveals a notable recovery in Ethereumโs fundamentals following the recent Pectra upgrade.
Between May 7 and May 19, Ethereumโs Realized Capitalization, a metric that reflects the total capital held within the asset, rose from $240.8 billion to $244.6 billion.
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This $3.8 billion increase marks a 1.6% rise and, more importantly, breaks a three-month-long downtrend that had persisted since early February.
The uptick in Realized Cap is often interpreted as a sign of renewed investor confidence, particularly among long-term holders. It suggests that capital is once again flowing into ETH at realized price levels, indicating potential accumulation and a shift away from recent bearish sentiment.
As Ethereum regains upward momentum on-chain, this shift could serve as a foundation for more sustainable growth, provided short-term market volatility doesnโt derail it.
Overheating at $2.5K Resistance
While Ethereumโs on-chain fundamentals are showing signs of recovery, short-term market indicators suggest brewing tension as the asset approaches the $2,500 resistance level.
According to CryptoQuant’s post, ETH is entering an โoverheatingโ phase, marked by a sharp surge in trading volume across exchanges, and a short-term correction before the breakout is possible.
A bubble chart shared by the analytics platform visualizes this dynamic, with volume spikes signaling heightened market activity primarily driven by profit-taking.
The $2.5K level carries psychological weight for traders and coincides with what analysts describe as a zone of โresting supplyโโwhere sellers are more likely to offload holdings.
โThe overheated condition points to a likely short-term correction as the market cools down, paving the way for renewed accumulation,โ the CryptoQuantโs shared statement claims.
Historically, such volume-driven rallies into resistance zones often precede brief corrections, as overheated conditions force the market to cool down.
ETH Supply Shock Predictions
In the meantime, a potential Ethereum supply shock may be underway, according to new data shared by market analysts.
The latest chart from Santiment reveals that the percentage of ETH held on centralized exchanges has dropped to an all-time low, while Bitcoinโs ratio is also at its lowest since November 2018.
This decline in exchange-held ETH suggests that investors are increasingly moving their assets into self-custody, often seen as a signal of long-term holding behavior.
This means that with less ETH available on trading platforms, the market could be setting up for a classic supply shock scenario.
If demand rises while exchange liquidity remains thin, upward price pressure could follow. Traders are closely monitoring this trend as a potential catalyst for Ethereumโs next major move.
Why This Matters
Ethereumโs fundamentals point to long-term strength, but short-term overheating near $2.5K could trigger a correction. The outcome may shape ETHโs direction in the near future.
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