Ethereum price has slid 7% in the last 48 hours, breaking below the $3,000 mark on Wednesday, May 8, amid intense speculations surrounding ETH ETF speculations. However, spikes in ETH network usage suggest a major rebound phase lies ahead.
Grayscale Pulls Ethereum Futures ETF Application
On May 7, Grayscale, the world’s largest cryptocurrency asset manager announced the decision to withdraw its application for Ethereum futures ETFs ahead of SEC decision.
Grayscale’s decision to withdraw ETH Futures ETF application now adds a layer of uncertainty to the prospects of SEC approving spot Ethereum ETFs this year.
The news appears to have impacted Ethereum price negatively. At the time of publication on May 8, ETH price has dipped below $2,900 decoupling from the upward trend in the broader altcoin markets.
Ethereum Users Launch 100,000 New Contracts in May 2024
Grayscale’s withdrawal of the ETH futures application has evidently dampened Ethereum market demand this week, putting downward pressure on price. However, a closer look at the on-chain data shows that Ethereum has not experienced a major deterioration in its fundamental network usage metrics.
CryptoQuant’s chart below represents the daily number of new smart contracts created on the Ethereum blockchain network. An increase in new contracts signals rising demand for ETH block space, which often triggers increased burn rate and upward price swings, and vice versa.
As seen in the chart above, the Ethereum network has experienced a persistent increase in new smart contracts since the start of May. The latest peak data shows 29,105 new ETH contracts were created on May 7, bringing the total for the month above the 100,000 mark.
Historical data shows that in October 2023, ETH daily new contracts consistently exceeded the 25,000 mark. Within weeks, the Ethereum price entered a remarkable rally that saw it gain over 55% before the end of the year.
This historical precedent lends credence to the bullish stance that the ETH price could benefit from the ongoing spikes in new smart contracts once the FUD surrounding Grayscale ETH ETF application withdrawal cools.
ETH Price Forecast: $4k Rebound Still in Sight?
At the time of writing on May 7, the Ethereum price was struggling to hold above $3,000 support. But, drawing insights from the over 100,000 new Ethereum smart contracts created in May, the ETH price looks set to make an early rebound towards $4,000.
IntoTheBlock’s global in/out of money chart groups all existing ETH holders by their entry prices. As seen in the chart below, a large cluster of 1.97 active addresses acquired 1.41 million ETH at a minimum price of $2,903.
In the near term, Ethereum’s price could avoid a reversal below $2,900 if investors in that cluster opt to defend their positions.
On the flip side, the spikes in new contracts trigger a surge in Ethereum market demand, as observed in October 2023. If this scenario plays out, the ETH price could enter a parabolic breakout at $4,000 as May 2024 unfolds.
Disclaimer: This content is informational and should not be considered financial advice. The views expressed in this article may include the author's personal opinions and do not reflect The Crypto Basic’s opinion. Readers are encouraged to do thorough research before making any investment decisions. The Crypto Basic is not responsible for any financial losses.
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