The Etheruem project’s crypto token, Ether’s price movements have been less than stellar lately. Ether has been logging lower highs and lower lows, steadily bleeding value all over exchange charts. From record highs of R5,000+ in April to a ceaseless bear run with no sign of a reversal in sight, what’s got the ‘bears’ so spooked? The more optimistic analysts initially claimed cryptocurrencies were experiencing a price correction, and would return to a more ‘natural’ position shortly, which was all well and good when crypto prices were nose diving across the board. Bitcoin has since rallied and is chugging along, ever upward and past the R40,000 mark. Etheruem rallied too, for a while, then reversed and continued its downward trek, what could the issue be?
Talk around the proverbial water cooler says ICO mania is to blame. The bulk of ICO’s recently have been launching an Etheruem based crypocurrency, in fact of 500 million of ether was raised by the ICO phenomenon and experts postulate that the drop in Ether’s value is simply the other side of the coin.
Startups that have just completed successful crowd sales appear to be deleveraging a portion of their risk, unloading a chunk of ETH and converting it into fiat currencies to perhaps, cover business expenses and attract technical talent as blockchain experts are in extremely short supply (which, despite the rise of cryptocurrencies, are mostly demanded in Dollars, Pounds, Euros etc.) The kicker however, because blockchain records are public, a lot of people may see multiple sell orders coming in from a number of startups all, during the same period of time no less! That’s bound to cause a panic, but that isn’t the full picture yet.
Due to lack of cryptocurrency regulation, with ICO’s also comes the risk of Pump-and-dump activity that could be hurting the price of Ether. Unlike organisations that cash out a portion of the Ether raised in an ICO for legitimate reasons, the Pump-and-dumpers will likely never have even intended to build a company and simply cash out all the ETH in their books for fiat and call it a day.
Another factor is that the overall mentality of the cryptocurrency market is changing. The arena is seeing more of the ‘Wolf of Wall Street’ types of investors, Investment Bankers, Stock Market Traders, and Hedge Fund managers, attracted by the high returns to be gained in crypto. They come armed with technical analysis skills and a take no prisoners attitude that thrive on the crypto-market’s volatility. These new investors, enter and exit trades, in shorter time frames, as opposed to the traditional buy-and-hold style of original cryptocurrency investors, and take profits on a monthly basis.
With the crypto-market ballooning rapidly in the past year and a half, coupled with uncertainty and concern caused by the raging Bitcoin scaling debate as well as Ethereum’s own scaling issues. Experts claim Eth’s price fall was inevitable but nothing to be too concerned about. Implementation of Proof of Stake protocols, and developments in the Raiden Network, as well as the Zk-SNARKs projects, are likely to put some wind back in Ether’s sail.