The leading altcoin, Ethereum, experienced a challenging month in March, marked by a series of bearish trends that reflected a broader market slowdown. 

However, as the market begins to show signs of recovery, the key question for April remains: Can Ethereum regain its bullish momentum?

On March 11, Ethereum plummeted to a two-year low of $1,759. This prompted traders to “buy the dip,” triggering a rally to $2,104 by March 24. 

However, market participants resumed profit-taking, causing the coin’s price to fall sharply for the rest of the month. On March 31, ETH closed below the critical $2,000 price level at $1,822. 

Amid ETH’s price troubles, the Ethereum network also experienced a severe decline in activity in March. Per Artemis, the daily count of active addresses that completed at least one ETH transaction fell by 20% in March.

As a result, the network’s monthly transaction count also plummeted. Totaling 1.06 million during the 31-day period in review, the number of transactions completed on Ethereum fell by 21% in March. 

Generally, as more users transact and engage with Ethereum, the burn rate (a measure of ETH tokens permanently removed from circulation) increases, contributing to Ether’s deflationary supply dynamic. However, when user activity drops, ETH’s burn rate reduces, leaving many coins in circulation and adding to its circulating supply. 

This was the case for ETH in March when it saw a spike in its circulating supply. According to data from Ultrasound Money, 74,322.37 coins have been added to ETH’s circulating supply in the past 30 days.

Usually, when an asset’s supply spikes like this without a corresponding demand to absorb it, it increases the downward pressure on its price. This puts ETH at risk of extending its decline in April.

In an exclusive interview with BeInCrypto, Gabriel Halm, a Research Analyst at IntoTheBlock, noted that ETH’s current inflationary trends “may not be a major red flag” to watch out for in April.

Halm said:

“Even though Ethereum’s supply has recently stopped being deflationary, its annualized inflation rate is still only 0.73% over the last month, which is still dramatically lower than pre-Merge levels and lower than that of Bitcoin. For investors, this moderate level of inflation may not be a major red flag, provided that network usage, developer activity, and institutional adoption remain robust.”

Moreover, regarding whether Ethereum’s declining network activity has played a significant role in its recent price struggles, Halm suggested that its impact may be overstated.

“Historically, from September 2022 to early 2024, Ethereum’s supply remained deflationary, yet the ETH/BTC pair still trended lower. This suggests that macroeconomic and broader market forces can play a far more significant role than token supply changes alone.”

On what ETH holders should anticipate this month, Halm said:

“Ultimately, whether Ethereum dips or rallies in April will likely depend more on market sentiment and macro trends than on its short-term supply dynamics. Still, it’s essential to keep an eye on network developments that could spur renewed activity and reinforce ETH’s leading position in the broader crypto landscape.”