The price of Ethereum has experienced a 7% decline over the past 48 hours, falling below the $3,000 mark on May 8. This drop is a result of speculation surrounding the approval of an Ethereum ETF. However, there are indications that the Ethereum network is experiencing increased usage, suggesting a potential rebound in the near future.
Grayscale, the largest cryptocurrency asset manager in the world, recently withdrew its application for Ethereum futures ETFs ahead of a decision by the SEC. This decision adds uncertainty to the possibility of spot Ethereum ETFs being approved this year. As a result, the price of Ethereum has been negatively impacted, currently sitting below $2,900 and deviating from the upward trend seen in other altcoins.
Despite the withdrawal of the ETH futures application, on-chain data reveals that the fundamental network usage of Ethereum has not significantly deteriorated. The number of new smart contracts being created on the Ethereum blockchain has been steadily increasing since the beginning of May. This increase in new contracts indicates a growing demand for ETH block space, which typically leads to higher burn rates and price increases.
In October 2023, there was a consistent daily increase in new ETH contracts, surpassing 25,000. This was followed by a significant rally in the price of Ethereum, with a gain of over 55% by the end of the year. This historical precedent supports the belief that the current spike in new smart contracts could lead to a positive impact on the price of ETH once concerns over the withdrawal of the Grayscale ETH ETF application subside.
Despite the struggle to maintain support above $3,000, the creation of over 100,000 new Ethereum smart contracts in May suggests that the price of ETH may rebound early and reach $4,000. The presence of a large cluster of active addresses that acquired 1.41 million ETH at a minimum price of $2,903 further supports the possibility of avoiding a reversal below $2,900.
It is important to note that this analysis is purely informational and should not be considered as financial advice. Readers are encouraged to conduct their own research before making any investment decisions.