The narrative of 'ultra sound money' in Ethereum loses momentum, but technical indicators show unexpected strength

The ‘ultra sound money’ proposal that positioned Ethereum as a deflationary alternative has begun to face significant questions. While the total ETH supply reaches all-time highs and the staking proportion has fallen 1% since November, analysts identify a revealing contrast in the market: despite these structural challenges, multiple technical and on-chain indicators suggest the network could experience a sustained bullish move. This apparent paradox warrants a deeper analysis of what is really happening with Ethereum.

What happened to Ethereum’s ‘ultra sound money’ proposal?

The concept of ‘ultra sound money’ emerged as a central narrative for Ethereum after the Merge in 2022. The idea was that, by switching to proof of stake (PoS) and burning transaction fees, Ethereum could maintain a controlled or even deflationary supply. However, recent data complicates this view. CryptoQuant documented that the total ETH supply is at all-time highs, while the proportion of validators participating in staking has decreased by 1% in recent months.

This erosion of the theoretical fundamentals of ‘ultra sound money’ reflects the more complex reality of the network: more users prefer to hold ETH without delegating it to staking, and demand for block space has altered the balance between gas burns and new emissions. It’s not that the narrative is entirely false, but it has ceased to be the main driver behind investor decisions.

Supply pressure versus demand strength

CryptoQuant’s analysis reveals a much more sophisticated technical picture when multiple layers are observed simultaneously. Ethereum’s realized price is around $2,040, compared to the current market price of $2,040 as of February 7, 2026. This realized price indicator (the average historical acquisition cost of all holders) acts as a crucial psychological support level.

The MVRV (Market Value versus Realized Value) ratio remains slightly above 1, suggesting a contained valuation for Ethereum despite its market cap of $246.40 billion. This level indicates that, on average, investors are holding minimal gains, creating a scenario where the upside potential appears considerable.

The buy and sell dynamics show a significant shift. The net transaction volume indicates that, despite the decline from the previous peak of $4,950 in 2024, selling volumes are at even lower levels than in previous cycles. This suggests that as prices correct, a growing demand for buying emerges— a characteristic feature of accumulation markets.

Large investors are not missing the opportunity

Institutional accumulation has reached record levels, providing a demand floor that offsets selling pressure. Major entities like BlackRock have continued acquiring Ethereum even during corrections, accumulating approximately 100,535 ETH valued at over $205 million at current prices. Cumberland has increased its holdings with 62,381 ETH, worth $127 million at current prices. World Liberty Financial has also actively participated in this strategic accumulation.

Whales (investors holding between 10,000 and 100,000 ETH) have been particularly active recently, buying over 600,000 ETH net during downward movements. This response from large players to price weakness is a classic indicator of institutional accumulation and suggests that the ‘smart money’ perceives value at current levels.

On-chain signals tell a different story

Santiment data provides an additional crucial perspective on Ethereum’s market health. Approximately 9.63 million ETH, equivalent to $19.66 billion at the current price of $2.04K, are stored in exchange wallets. This volume is the lowest recorded since August 2024, indicating a structural change in holder behavior.

The progressive withdrawal of assets from trading platforms typically reflects growing confidence among investors and a shift towards long-term storage. Less ETH on exchanges means less potential selling pressure, significantly mitigating the risk of substantial short-term price drops.

The recent CoinShares report adds another layer of confirmation: Ethereum has led capital inflows into crypto investment products during the first weeks of 2025 and the first of 2026. Nearly $800 million flowed into Ethereum-linked products, almost double the $407 million directed toward Bitcoin-related products in the same period. This shift in institutional capital flow is particularly significant.

An emerging narrative for Ethereum in 2026

Although the original ‘ultra sound money’ proposal has lost prominence as a core investment argument, Ethereum is writing a new narrative in 2026. The convergence of institutional accumulation, exchange withdrawals, decreased selling pressure, and solid technical fundamentals is creating conditions for a potential sustained appreciation.

Ethereum’s future trajectory will depend on broader macroeconomic variables, particularly Bitcoin’s ability to maintain or improve its position, which generally sets the overall sentiment in the crypto market. However, technical and on-chain indicators suggest that, regardless of the fate of the ‘ultra sound money’ narrative, Ethereum has a robust institutional demand base that could support a dynamic price floor.

With a market capitalization of $246.40 billion and a 24-hour trading volume of $824.09 million, supply and demand fundamentals appear to be rebalancing toward the upside.

Disclaimer: The information provided in this article is for educational purposes only and should not be considered financial or legal advice. Always conduct your own research or consult a professional when dealing with cryptocurrency assets.