Light at the end of the Ethereum tunnel
It’s been a rough go for the second-most popular blockchain these days. Once the belle of the ball, facilitating the launch of billions of dollars in ICO investment around the globe, Ethereum has been steadily descending in value for months now.
A recent slide in the larger crypto market caused panic for many young ICO’s who were sitting on piles of Ether since their successful fundraising ventures had begun. A company that may have enjoyed raising 30 million dollars at the market’s peak in early 2018 could have potentially lost nearly 80% of their investment funds, left with a mere 6 million dollars worth of ETH in today’s market.
Of course, one might argue that these companies were insane to keep their funds in ETH and not “cash out” to escape the volatility of the market, but this is precisely why the price of Ether has plummeted. As ICO’s have seen prices of their Ether diminish, many began slowly selling off into cash to avoid such losses. It’s only more recently that more ICO’s have jumped into the panic bandwagon and have moved to liquidate their Ether, as well.
Hindsight, of course, is 20/20. It’s easy to now look back and see that it clearly would have been best to sell at the top back in January and then safely sit on fiat funds to fund all the costs of building a given ICO company. This was not so evident back in January when it seemed like nothing could stop the incredible market momentum everyone was enjoying at that time.
And months from now, perhaps it will be obvious that this is the right time to start accumulating ETH again. It has continued a downward trend, but is slowing now and seems to be leveling off just below the $300 USD mark. It does appear that the bulk of the large Ether sell-off has been completed. Keep in mind that there are likely more ICO’s sitting on some ETH, just waiting for it to recover a little before unloading a little more at a desirable price, so the market value could remain suppressed for a while.
But there is light at the end of the tunnel. The CBOE has recently made noise about the possibility of Ethereum futures. Last year, this caused quite the buzz with Bitcoin in the late fall. This could bring more positive attention to Ethereum in the near future. However, many have expressed opinions that the CBOE futures may have suppressed the market due to the ability to short Bitcoin at an institutional level. While there does appear to be some correlation between Bitcoin futures and price drops in Bitcoin, it’s pretty difficult to prove any causation due to the fact that these futures are settled in USD, are relatively small in volume, and do not have a direct effect on the scarcity of Bitcoin itself. On the other hand, the ICE digital asset exchange, Bakkt, scheduled for launch in November, may actually contribute more adoption and positivity to the market than any derivatives-based market could ever hope to achieve.
On a more clearly positive note, the future progress of Ethereum has reached a degree of consensus among developers. Looking forward to the Constantinople upgrade arriving in October, developers have agreed to a few important points. Delaying the difficulty bomb by a year, developers have agreed to reduce the block reward from three to two. This is being touted as a compromise as many in the community were pushing for a block reward reduction to one, which would have likely caused an increase in value due to scarcity, but may have also caused miners to flee to other, easier-to-mine alternatives.
The Constantinople upgrade is also a step toward Ethereum’s future transition from Proof-of-Work to Proof-of-Stake, a move still seen as controversial by many, but generally perceived as a positive move forward. Additionally, developers are considering an algorithm change that will prevent ASICs from dominating the mining of Ether while it remains as a Proof-of-Work consensus model in the shorter term.
So it is indeed possible that we are now looking at the low point for the price of Ether. Ultimately, nobody really knows. But as more positives begin to accumulate, it could be that the darkest days of Ethereum are finally in the rearview mirror, as we move toward the light in what has been a long and depressing tunnel.
This should not be taken as any kind of professional financial advice, nor should it be used as a basis for any purchasing or selling decisions regarding cryptocurrencies. Cryptocurrencies are highly volatile and risky in nature. Do not invest what you can not afford to lose.