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Number of New Ethereum Smart Contracts Falls 60% in 2023

Ethereum prices might be solid, and bulls are looking to drive the coin toward $1,700, but on-chain data points to dropping activity from developers judging from the number of new smart contracts deployed in the first three weeks of January.

Number Of Smart Contracts Deployed On Ethereum Falling

The number of new smart contracts deployed over the past few weeks, since the beginning of 2023, has fallen by more than half. The number of new smart contracts deployed on January 1, 2023, stood at 139,699.

However, a total of 56,370 smart contracts were deployed on Ethereum on January 23, a solid recovery from the 10,079 figure registered on January 14, but still a long way from its January 1 levels.

The contraction over the past three weeks represents a 60% drop from January 1 levels, a concern for analysts. Ordinarily, the number of contracts deployed on a smart contract network points to on-chain activity, and the more dApps there are on any frontier, in DeFi, NFTs, gaming, and more, the higher the probability that this activity could spill into price action since ETH, the native token of Ethereum, is used to settle network fees.

Whenever there is a spike in on-chain activity, the demand for block space is higher, requiring developers to use more ETH for a slot in a block. 

Falling contracts deployment coincides with the exemplary performance of ETH prices over the month. ETH prices have rallied from $1,200 on January 1 to $1,659 on January 20. Even though bulls are yet to push the coin above $1,700, an immediate resistance level that, if broken, could see ETH prices float to new Q1 2023 highs. 

Ethereum Price on January 25

History shows a direct correlation between the number of contracts deployed and price action since developers often double down their efforts whenever prices are trending higher, deploying more contracts. This trend is not validated in the performance from early January, considering the divergence between spot prices and the number of contracts launched.

Even though there was a near 5X spike between January 14 and January 23, there could be a significantly higher number of contracts if this action were aligned with ETH prices.

Nevertheless, smart contracts on the Ethereum network saw solid growth in 2022. A report by the software firm, Alchemy, showed that over 100,000 dApps were launched in 2022. 

Transaction Fees Falling

The average transaction fee on Ethereum has been on the rise since the beginning of the year, according to data from Cryptoquant. From January 1, fees have more than doubled, rising from $2.92 to $3.99 on January 23.

Even though fees are relatively higher now compared to the start of the year, they are multiples lower than in May 2022 when the average fee to post a simple transfer was $22. Subsequently, deploying smart contracts, depending on their complexity, was multiples higher. 

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Ethereum Devs Try To Leverage Price Surge As Smart Contracts Reach New High

Ethereum rallied with the rest of the crypto market, reaching above $1,500 to land at a new one-month high. As the market rallied, developers had roused from their slumber looking to take advantage of the renewed interest in the market. This saw the number of new smart contracts deployed on the network reach new 2022 highs.

Devs Bring The Heat

Through 2022, the number of new smart contracts being deployed on the Ethereum network had been on the decline. This decline is understandable given that the market had entered another stretched-out crypto winter and investors were no longer willing to take as many risks as they did back in 2021.

Developers had to shelve some of their projects as they waited for better market conditions to launch, which was provided by the market recovery. New smart contracts were deployed rapidly in the last week, leading to a new all-time high in 2022. 

In this 7-day period, there have been more than 35,000 new Ethereum contracts deployed. The deployment rate of these new contracts has followed the market through its recovery. As prices are high, investors are more likely to put money into new projects. Hence the willingness of developers to put their contracts into the market. 

Ethereum new smart contracts

New smart contracts surge | Source: CryptoQuant

Daily active addresses on the network also recorded an uptick during this time. It is up about 25% in the last week, although it is far from reaching its 2022 all-time high of 934,000 active addresses back in July. Accordingly, the transaction count also saw an increase during this time.

Can Ethereum Hold Up?

Even with the marked increase in activity on the network, it has not been enough to hold up the price of Ethereum. The digital asset which had reached a peak just below $1,600 on Thursday had begun to quickly shed its gains ahead of the opening of trading hours on Friday.

Ethereum price chart on TradingView.com

ETH price loses footing above $1,500 | Source: ETHUSD on TradingView.com

Ethereum had lost almost 4% of its value in the last 24 hours, which dragged its price down below $1,500. Support that had been mounting at this level had proven to not be sustainable and bears had broken through the barrier without much hassle.

Exchange inflows for the cryptocurrency are on the rise in the last day with a 0.5% increase. This indicates mounting sell pressure on the market. However, with outflows growing just as rapidly, Ethereum investors seem to be carrying out a balancing act at this junction.

The 50-day moving average points towards hold for ETH at this point.  The next significant resistance level now lies at $1,570. As the market goes into the weekend which is always marked by low volatility, it is hard to pinpoint where the price could swing.

Featured image from The Coin Republic, chart from TradingView.com

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