Following a rather stable period in April with reduced network activity and stagnant price movement, Ethereum (ETH), the second-largest cryptocurrency, seems poised for a change.

Optimism surrounds ETH holders for May, driven by solid fundamentals, the anticipated Pectra upgrade, and increased interest from institutional investors via ETH exchange-traded funds (ETFs).

Although ETH faced challenges in April, May brings hope. On-chain data for April revealed a decline in user engagement on the Ethereum network, while ETH struggled to breach key resistance levels due to a lackluster market.

During this period, user interest in Ethereum dropped, leading to reduced active addresses, daily transactions, network fees, and revenue, affecting ETH's performance with its price lingering below $2,000 throughout April.

Gabriel Halm, a research analyst at IntoTheBlock, suggested in an interview that ETH could surpass the $2,000 milestone in May and maintain stability above it. He highlighted the increased capital flowing into ETH spot ETFs, Ethereum's dominance in decentralized finance (DeFi), and the upcoming Pectra upgrade as contributing factors.

Inflows into ETH ETFs in April were $66.25 million, a shift in market sentiment from the $403.37 million outflows in March, indicating a potential return of investor confidence. Ethereum's dominance in the DeFi sector, with over 50% TVL locked in its protocols, positions it as a preferred network for various financial applications.

With May bringing improved market conditions, a resurgence of capital inflows into Ethereum's DeFi sector may boost ETH demand and support its price surge. The upcoming Pectra upgrade on May 7, 2025, is expected to enhance the network's scalability, reduce transaction costs, enhance security, and introduce smart account functionality, potentially driving up ETH demand further this month.

However, ETH's growth in May is subject to broader market stability. Economic pressures, especially regarding the CPI report expected on May 13th, could influence market sentiment and volatility. Any signs of inflation or actions by the Federal Reserve may impact the crypto market, potentially affecting ETH's price.

ETH's price is closely tied to US equities, with equity market stress possibly leading to similar pressure on ETH. The high correlation implies that ETH may be affected by market downturns or inflation fears akin to traditional risk assets like the S&P 500. Against this backdrop, sustaining a push above $2,000 in the future would rely on inflation trends, risk sentiment in traditional markets, and ETH's correlation to equities.