Following a relatively stagnant April characterized by reduced network demand and sideways price movements, the second-largest cryptocurrency, Ethereum (ETH), may be poised for a potential shift.

ETH holders are showing optimism heading into May, driven by improving fundamentals, the expected Pectra upgrade, and renewed attention from institutional investors via spot ETH exchange-traded funds (ETFs). During April, on-chain metrics revealed a decrease in user activity across the Ethereum network, while the broader market's lack of momentum kept ETH trading beneath key resistance levels.

Artemis reported that over the 30-day period, Ethereum witnessed a sharp decline in user demand, resulting in a reduction in active addresses, daily transaction volume, and subsequently, network fees and revenue. This downturn, combined with the broader market's weakness, affected ETH’s performance, keeping its price below the $2,000 threshold throughout April.

In an interview with BeInCrypto, Gabriel Halm, a research analyst at IntoTheBlock, expressed his belief that ETH's price might surpass the $2,000 mark in May and stabilize above it. For Halm, the increased capital inflows into ETH spot ETFs, Ethereum's leadership in decentralized finance (DeFi), and its impending Pectra upgrade could contribute to achieving this milestone.

SosoValue data indicates that net inflows into ETH ETFs reached $66.25 million in April, marking a notable change in market sentiment compared to the $403.37 million in net outflows seen in March. This transition from significant outflows to moderate inflows suggests that investor confidence in the altcoin is slowly recovering. It implies that institutional participants may be preparing for a long-term recovery, particularly as Ethereum’s network fundamentals start to strengthen, one of which is its growing dominance within the DeFi ecosystem.

Currently, more than half of the total value locked (TVL) in DeFi protocols remains on the Ethereum blockchain. This signifies that the Layer-1 (L1) continues to serve as the preferred settlement layer for diverse financial applications such as lending, staking, yield farming, and decentralized exchanges. Consequently, if broader market conditions begin to improve in May, fresh capital inflows into Ethereum’s DeFi sector could stimulate demand for ETH and support its price rally.

Additionally, Halm mentioned that Ethereum’s upcoming Pectra upgrade, scheduled for May 7, 2025, could further bolster ETH's price performance this month. The upgrade aims to enhance the network's scalability, lower transaction costs, boost security, and introduce smart account functionalities. These enhancements might spark a rise in user demand throughout May, potentially driving ETH's price upward, assuming macroeconomic conditions remain supportive.

Nevertheless, the overall economic pressures present a considerable risk for ETH in May. Halm highlighted that the upcoming Consumer Price Index (CPI) report on May 13th will be crucial, possibly affecting market sentiment and contributing to heightened volatility. Inflationary pressures or hawkish signals from the Federal Reserve could intensify risk-off sentiment in the crypto market, exerting downward pressure on ETH’s price.

Halm also noted that ETH's price remains closely aligned with U.S. equities. Thus, if equity markets encounter renewed challenges this month due to inflation concerns or expectations of interest rate hikes, the altcoin may face similar headwinds.

While a sustained move above $2,000 remains feasible, any upward movement will likely hinge on inflation trends, risk appetite in traditional markets, and the degree to which ETH remains connected to equities.

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