Ethereum's Pectra Upgrade Spurs Volatility Surge: Over 38,000 ETH Burned, Altcoin Market Booms with PEPE Frenzy

Ethereum's Pectra upgrade on May 7, 2025, has made ETH deflationary, burning over 38,000 ETH in 24 hours and increasing on-chain activity. This has widened the volatility gap between Ether and Bitcoin, with traders anticipating further ETH price movements. The altcoin market is also active, led by memecoin PEPE, which surpassed Dogecoin in trading volume and rose 35% in price, indicating renewed investor interest.

Ethereum’s Pectra Upgrade Sparks Deflation and On-Chain Surge

Ethereum’s Pectra upgrade, a dual-layer hard fork combining the Prague and Electra updates, was deployed on May 7, 2025. It introduced 11 Ethereum Improvement Proposals (EIPs), making it the most comprehensive upgrade since The Merge in 2022. The changes targeted both the execution and consensus layers, aiming to improve scalability, staking efficiency, and user experience.

One of the most immediate effects of the upgrade has been a sharp increase in on-chain activity. According to data reported by Coindesk, over 38,000 ETH were burned within 24 hours of the upgrade, pushing Ethereum into deflationary territory with an annualized inflation rate of -0.53% Crypto Daybook Americas: PEPE Signals Altcoin Frenzy as Rampant Ether Outpaces Bitcoin. This burn rate is a result of increased transaction volume and the EIP-1559 mechanism, which permanently removes a portion of ETH from circulation with each transaction.

The circulating supply of ETH has dropped to an 18-day low of approximately 120.69 million, according to on-chain metrics Pectra Is Boosting Ethereum Network, Pushing the Price Toward $2000. This contraction in supply has coincided with a 12% price increase, pushing ETH above $2,000 for the first time since early April.

Ether Volatility Surpasses Bitcoin

The market has responded swiftly to Ethereum’s structural changes. Deribit’s Ether Implied Volatility Index (ETH DVOL), which measures 30-day expected price turbulence, rose 11% to an annualized 72% this week. In contrast, Bitcoin’s equivalent volatility index remained steady near multimonth lows around 45%. This 27% spread between ETH and BTC volatility is the widest in at least two years, according to TradingView data Crypto Daybook Americas: PEPE Signals Altcoin Frenzy as Rampant Ether Outpaces Bitcoin.

The divergence in volatility expectations reflects growing trader interest in Ethereum and the broader altcoin market. ETH has outpaced BTC in both price movement and derivatives activity. ETH/USDT and ETH/BTC pairs saw price surges of 8.2% and 5.3%, respectively, within 24 hours of the upgrade Ethereum Pectra Upgrade Turns ETH Deflationary: Inflation Rate Drops to -0.53% and Daily Burn Doubles.

PEPE Leads Altcoin Resurgence

The altcoin market has also seen a notable uptick in activity, with memecoin PEPE emerging as a standout performer. On May 8, PEPE surged by approximately 35%, pushing its price to $0.00001091—levels not seen since February 2024. The token’s daily trading volume exceeded $3.5 billion, surpassing Dogecoin and making PEPE the most actively traded memecoin during the period PEPE Coin Price Rockets Past Dogecoin in Trading Volume After 35% Jump.

This rally was fueled by a combination of whale accumulation and bullish sentiment in the derivatives market. A single investor reportedly acquired 2 trillion PEPE tokens worth $4.36 million, while open interest in PEPE futures reached $531 million—just shy of its all-time high. Binance data shows that 65% of traders are holding long positions in PEPE, with a long/short ratio of 1.86, indicating strong bullish bias.

Technical indicators also support the upward momentum. PEPE has broken through the 23.60% Fibonacci retracement level and is now targeting the 38.20% level at $0.000013344, suggesting a potential 22% upside from current levels.

Broader Market Context and Derivatives Positioning

The broader crypto market is showing signs of renewed enthusiasm. Bitcoin crossed the $100,000 mark, contributing to favorable conditions for altcoins. ETH is currently trading at $2,328.10, up 20.03% in the past 24 hours, while BTC is up 2.92% at $102,725.44 Crypto Daybook Americas: PEPE Signals Altcoin Frenzy as Rampant Ether Outpaces Bitcoin.

On offshore exchanges, perpetual funding rates for BTC, ETH, and other major tokens are hovering between 10% and 14% annualized, reflecting a bullish bias. In the options market, both BTC and ETH show a call bias, with traders positioning for further upside. Notably, some market participants are buying higher strike ETH calls on Deribit, anticipating continued price gains following the Pectra upgrade.

Despite the price rallies, the annualized futures basis on the CME for both BTC and ETH has remained steady near 7%, suggesting a maturing market where arbitrage opportunities are narrowing.

Ethereum’s Technical Enhancements

Beyond market metrics, the Pectra upgrade introduced several technical improvements. These include increasing the maximum number of data blobs per block from 6 to 9, which is expected to enhance throughput for layer-two solutions like Arbitrum. Additionally, validators can now collect rewards on up to 2,048 staked tokens, potentially attracting larger validator pools and improving network efficiency Ethereum Explodes 23% as Pectra Upgrade Causes Deflation – Can ETH Hit $3,000?.

Another notable change is the ability for transaction recipients to pay gas fees, addressing a long-standing usability issue for wallets lacking ETH. These enhancements are designed to improve the Ethereum Virtual Machine (EVM), making it more scalable, faster, and cost-effective.

Ethereum's Pectra Upgrade Spurs Volatility Surge: Over 38,000 ETH Burned, Altcoin Market Booms with PEPE Frenzy

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