So far, this crypto cycle suggests that the 2025 network upgrades haven’t really translated into price gains.
The Q1 data reinforces that trend. Ethereum’s [ETH] Fusaka and Pectra upgrades improved network fundamentals, but ETH still closed Q1 down 29.26%. That’s even worse than the 28.28% correction in Q4 2025.
In total, ETH has now dropped nearly 60% over six months, marking its weakest quarter-over-quarter performance since the 2022 bear market.
That said, on-chain activity tells a different story. Ethereum just recorded its busiest quarter ever, processing 200 million transactions in Q1 2026, up 43% from Q4 2025.
So while price action has been weak, the effects of the network upgrades are clearly starting to show up in usage at the beginning of the new year.
Reinforcing this trend, it wasn’t just transaction count that stood out in Ethereum’s strong Q1.
On the activity side, active addresses climbed past 33 million, while throughput reached 2.52 Mgas/s. Taken together, higher throughput alongside elevated transaction volumes signals a clear uptick in overall network demand.
In essence, these metrics alone are enough to support the impact of the upgrades on Ethereum.
Naturally, the question becomes: Is the market starting to price in ETH’s undervaluation? In other words, is this on-chain momentum enough to fuel ETH’s Q2 rally?
So far in Q2, Ethereum is already up over 14%, outperforming Bitcoin [BTC], but the key question is whether this momentum can hold.
Ethereum’s on-chain strength and ETF bid align ahead of Q2 move
Ethereum’s 200 million transaction volume has set a strong precedent, not just for its network upgrades.
According to CoinMarketCap, Ethereum’s stablecoin market, which held steady around the $164 billion level throughout the quarter, was a key driver of the network’s elevated transaction activity.
With stablecoin supply on Ethereum already up nearly 2% in Q2 so far, network fundamentals continue to look strong.
However, early signs suggest the broader market may be starting to catch up to ETH’s on-chain strength. Built on the proof-of-stake mechanism, Ethereum’s validator queue remains a key signal of sustained staking demand.
In this context, around 2.8 million ETH sits in the entry queue versus virtually zero in the exit queue, pointing to continued validator inflows expected to play out over the next 48 days.
If this trend holds, and Ethereum’s staked supply stays near the current 38.9 million ETH (32% of total supply), the network could push past the 40 million ETH staking threshold by mid-Q2, reinforcing tightening liquid supply dynamics.
Against this backdrop, Ethereum’s ETF flows are starting to gain relevance.
According to Lookonchain data, ETH recorded net daily ETF inflows of $54.55 million, compared to BTC’s net outflows of $10.98 million.
While it’s still early to call this a sustained shift, Ethereum’s improving network performance, expanding staking queue, and emerging Q2 price divergence could point to the early stages of capital rotation toward ETH.
This, in turn, builds a strong setup for Ethereum’s Q2 rally, potentially positioning ETH to outperform BTC.
Final Summary
- Ethereum’s network activity is surging, with record transactions, strong staking demand, and growing stablecoin usage supporting fundamentals.
- Institutional flows are turning positive, raising the possibility of capital rotating into ETH and supporting a Q2 rally.
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