Ethereum (ETH), the second largest cryptocurrency by market capitalization, continues to decline significantly harder than the market leader, Bitcoin (BTC).
The price of one ether coin (ETH) reached its all-time high in mid-January of this year, topping out just above $1430. Now, Ethereum is trading at $220.30 per coin — and the near future isn’t looking particularly positive.
The first reason Ethereum may be crashing so hard is that its previous highs were inflated, leading to the cryptocurrency itself being overvalued. Kyle Chapman, an analyst at Cosimo Ventures, told CNBC:
When people saw the trends in ICOs as they kept going up, it’s easy to understand why people think this could be a long-term store of value. That was the appeal for it, and that’s why you saw the extreme growth last year.
The ICO bubble has popped, along with the general cryptocurrency market bubble — and with increased regulation, it’s unlikely the ICO market will ever recover to previous highs. Thus, it stands to reason that Ethereum may not either.
Investors are Impatient
Another issue plaguing Ethereum — and every other cryptocurrency, for that matter — is the fact that cryptocurrency investors expect massive returns in a very short period of time. Very few retail investors who got involved late last year are still playing the game.
Kyle Samani, a managing partner at crypto hedge fund Multicoin Capital, explained to CNBC:
People started building apps and software, but the market got ahead of itself. They are realizing you have to be in it for the long haul, and some investors don’t have the patience.
Eiland Glover, CEO of Kowala, agreed, stating:
Ethereum is facing a massive crisis in investor confidence over its inability to rapidly scale in the face of competition. The murkiness of Ethereum’s path forward and the lack of DApp mainstream adoption are both hurting ER20 token prices and the market as a whole.
A Flood of FUD
Ethereum has also become the recent victim of a flood of FUD (fear, uncertainty, and doubt).
Earlier this week, TechCrunch‘s Jeremy Rubin suggested that ether itself may be worthless.
Articles like this certainly aren’t helping the cryptocurrency’s case. “There is also a lot of FUD being spread around about the death of ether, which may be contributing to an emotional sell off,” Matthew Newton, market analyst at eToro, told CNBC.
Angel Versetti, CEO and co-founder of blockchain-powered network Ambrosus, claims much of this FUD is actually the product of Ethereum competitors, explaining:
There are more stakeholders with concentrated power (or large stake of holdings of coins) among other altcoins, who are promoting a narrative that Ethereum’s competitors are better and stronger. It’s important to bear in mind, however, that these predictions are not based on fact, and are merely speculative in nature.
Easier to Short
Finally, the entire cryptocurrency market is firmly in the bears’ control. Because of this, most traders are profiting by shorting Ethereum.
“The reality is it is a lot easier to short ether now, and that contributes to the downward movement,” said Timothy Tam, CEO of CoinFi, told CNBC. “Ether has underperformed, but its use case hasn’t changed.”
What do you think about the current state of the Ethereum blockchain and the price of ether? Let us know in the comments below!
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