Ethereum has seen a major surge in short-term interest, with over four million new traders jumping into the market in recent days. This wave of new participants has often been a reliable indicator of upward momentum in the past, giving investors hope that Ethereum could be gearing up for another rally. However, while the number itself is impressive, experts are warning that it might not be as bullish as it seems

Historically, crossing the four million trader threshold has marked the beginning of strong price rallies for Ethereum. In late 2024, a similar spike in trader activity helped push ETH above $4,000. Investors often interpret such large inflows of short-term interest as a sign that the market is heating up, and indeed, short-term demand can have a significant impact on price movements, especially in the altcoin space.

Ethereum’s influence in the altcoin market cannot be overstated. As the largest altcoin and the only one with a spot ETF currently approved, its price performance tends to set the tone for other cryptocurrencies. When Ethereum moves, the rest of the market often follows. This is why the jump in trader activity is being closely watched—it could signal a broader shift in investor sentiment across the crypto sector.

However, beneath the surface, there are warning signs. Despite the influx of new traders, Ethereum is struggling with one key issue: retention. While millions of new users are joining the network, fewer of them are sticking around in the long term. Ethereum’s Monthly Cohort Retention Rate, a measure of how many users remain active month over month, has been steadily declining.

This decline in retention is a red flag for market stability. When users come and go quickly, it suggests that much of the recent activity is driven by speculation rather than genuine, long-term interest. These fast-moving traders are often chasing quick profits, and once volatility increases or prices start to dip, they’re likely to exit just as fast as they entered. That kind of behavior can create short-lived price spikes followed by equally sharp declines, making the market more unpredictable.

Another concerning trend is the recent increase in Ethereum netflows to centralized exchanges. A spike in exchange deposits typically suggests that more investors are looking to sell their holdings. In this case, Ethereum saw the highest level of exchange netflow in the past three weeks, which could point to mounting sell pressure. If that trend continues, it may limit Ethereum’s ability to break through key resistance levels.

Currently, Ethereum is trading just below $2,700. Analysts believe that if demand from short-term traders holds and selling pressure eases, the price could rebound toward $2,800 and possibly retest $3,000 in the near future. But if user retention remains weak and the volume of ETH sent to exchanges continues to rise, there’s a real risk the token could fall back to $2,448—a level that has acted as support in recent months.

This situation highlights the fragile balance Ethereum currently faces. On one hand, renewed interest from traders could act as a powerful driver of short-term gains. On the other, the lack of long-term commitment and increased sell activity raise questions about whether this momentum can last.

For investors, the key takeaway is caution. While the surge in trader numbers is encouraging, it’s essential to look beyond headline figures and consider the underlying trends. Ethereum’s future price movements will depend not just on how many people are buying in today, but how many of them choose to stay invested tomorrow.

As the crypto market continues to evolve, Ethereum remains a central player. But in a landscape driven by fast-moving sentiment and short-term strategies, lasting growth may depend on converting hype into sustained adoption.