These 2 Bullish Signs for Ethereum Could Actually Be a Sell Signal

Once in a great while, the best-looking numbers are the ones investors should worry about the most. On that note, Ethereum (CRYPTO: ETH) just posted its busiest quarter in history, processing more than 200 million transactions in Q1 2026, a 43% jump from the prior quarter. Meanwhile, after years of effort spent scaling up its throughput capacity, the chain's gas (user) fees are 98% lower than three years ago, with transactions costing about $0.11.

A chain reporting record activity and rock-bottom fees at the same time looks like getting two bullish votes of confidence for investing. But together, the truth is that they sketch a troubling picture, and Ethereum's price has fallen almost 60% from its August 2025 peak even as the usage of its chain keeps climbing.

Let's investigate what's happening here and determine whether it's a sell signal or just a yellow (or red) flag.

Image source: Getty Images.

Good numbers tell a bad story here

The unifying problem underpinning these two bullish figures is that Ethereum got much better at processing transactions, but the reward for holders has been zero.

In August 2021, a fee-burning mechanism began destroying a portion of every gas fee paid on the network. A year later, the September 2022 transition to proof-of-stake (PoS) slashed new coin issuance by roughly 90%. Together, these changes were supposed to shrink Ethereum's supply over time, because when burns outpace the rate of new issuance to validators, the coin's supply contracts.

The catch is that the mechanism only works when gas fees are high enough to burn significant amounts of Ether coins. For the process to become meaningful, average gas prices need to exceed a threshold of roughly 16 gwei (the unit of measurement for gas). The current average gas price is less than 0.2 gwei.

The result is that rather than shrinking, Ethereum's supply has grown by an estimated 950,000 tokens since late 2022, and its circulating supply is currently expanding at about 0.2% per year.

But why are fees so low despite record usage? One reason is that Ethereum's scaling strategy sought to redirect a lot of transaction traffic off its mainnet and to Layer-2 (L2) networks run by third parties. L2s now handle 95% of the total throughput, which would otherwise be handled on the mainnet.

In other words, Ethereum successfully built the highway, but the tolls don't cover the cost of the asphalt, as drivers have been heavily encouraged to seek alternative routes on side streets and local access roads, which have also been intentionally built up to accommodate them more smoothly.

For investors, that's a big flaw. Without a true mechanical way to link the amount of activity on the chain to returns for holders, buying the coin means hoping others bid its price up, even though there isn't much reason for them to do so based on the asset's fundamentals.

So should you sell?

It's understandable for investors to be out of patience with Ethereum. It has fallen 26% during the past five years, inflicting losses and enormous opportunity costs on those who held it during that period. Nonetheless, its fortunes are fully capable of reversing, and selling it now, after its long struggle against high gas prices has been definitively won, may turn out to be a mistake.

Ethereum remains the largest smart contract platform by a wide margin, and its project ecosystem keeps it relevant in ways price action obscures. The Glamsterdam upgrade, expected mid-2026, aims to raise the gas limit and enable parallel transaction processing, boosting the chain's throughput even more and perhaps enticing players from the traditional financial sector to begin building projects there. And when a new crypto project is being planned, the odds are that it will make Ethereum its home thanks to the incredible base of capital available there in the form of $162 billion in stablecoins. Thus, there are at least a few opportunities for Ethereum to perform well from here.

The pair of bullish signs is painting a bearish picture for the chain today because of its configuration, and that's something that can be changed. The biggest thing that would solve this issue would be an network revision that changes the coin's tokenomics. Although that isn't being discussed at the moment, it's a live possibility in the long term.

So for now, it's probably best to not sell your Ether, as tempting as it may be.

Alex Carchidi has positions in Ethereum. The Motley Fool has positions in and recommends Ethereum. The Motley Fool has a disclosure policy.