Ethereum’s Pectra Upgrade Sparks Activity Surge, ETH Eyes $2,000

The Ethereum Pectra upgrade has led to an 18-day low in ETH’s circulating supply as user activity surges. Data shows increased active addresses, which tends to drive higher gas fees and burn rates. ETH may be on course to reclaim the $2,000 price point, but downside risks persist, particularly if it fails to maintain recent breakout levels.

Ethereum’s eagerly awaited Pectra upgrade went live yesterday and it’s already shaking things up in a big way. The latest on-chain data shows that the circulating supply of ETH has dipped sharply, now sitting at an 18-day low. This reduced supply coincides with a noticeable spike in user activity on the Layer-1 network over just the last day, which could mean exciting things for ETH’s price if this momentum continues.

According to Ultrasoundmoney, since the launch of the Pectra Upgrade on Wednesday, ETH’s circulating supply has significantly reduced to around 120.69 million. This notable network overhaul, which allows validator limits to rise to 2048 ETH, also introduces smart wallets and enhances the overall efficiency of the network. Clearly, these changes are fuelling a surge in activity, tightening the supply while demand is on the rise.

Further data from Glassnode indicates that Ethereum’s active address count has reached a 30-day high. This increase signals a revival in user engagement, with 474,044 unique addresses active on the network as of May 7, whether as senders or receivers. When more unique wallets transact, it frequently points to growing demand, and an uptick in network usage correlates with higher gas fees and an increased rate of ETH burning.

As more users engage with Ethereum, transactions flow more freely across the network, resulting in higher gas fees and a faster ETH burn rate. Etherscan reports that, in fact, the burn rate of ETH is now at its highest since the start of May. Again, as more ETH gets burned, the lower the circulating supply becomes, which puts upward pressure on the price of the altcoin.

The big question on everyone’s mind is whether ETH can rally back to the $2,000 mark or if it will retract back to the $1,744 range. Right now, on the daily chart, ETH trades above a horizontal channel that contained its price between April 23 and May 7, where it faced resistance at $1,872 and found support down at $1,744.

If it manages to maintain this breakout, there’s a strong chance we could see ETH pushing through that psychological barrier of $2,000, and potentially even onward to $2,235. But, if this retest doesn’t hold up, we might see ETH slip back down to $1,744 or, in a worse case, to around $1,564.

As always, investors should stay alert in this ever-evolving landscape and remember that market dynamics can shift swiftly.