Ethereum Price Drop: What Are The Reasons For $22 Bln loss & Future Outlook for ETH


Ethereum is the 2nd largest cryptocurrency after Bitcoin.

Despite this prestigious position and its 3000% rise from January to April this year, Ethereum's market cap has now dropped dramatically: it went from $36 billion in may to $14 billion now, recording a $22 billion loss within 2 months.

So what about the future of Ethereum? And what are the reasons for the price drop?

(Disclaimer: Everything expressed in this post is my personal opinion and should not be taken as trading advice. No one, including me, can pinpoint the reasons for cryptocurrency price fluctuations for sure, the reasons explained in this post are personal speculation.)


Reason #1: ICO's

2017 has been the year of ICO's. The term ICO refers to Initial Coin Offering - meaning the start of a fundraiser for a new cryptocurrency project.
ICO's have been breaking records all year, with huge projects like Bancor, Tezos or EOS raising hundreds of millions of dollars.
Almost all of them accepted Ether (or ETH and Bitcoin) as payment method.
So now think one step ahead: let's say a company has raised $100 million in Ether tokens from their ICO.

What are they going to do with all those coins? ... Cash them out!

It's only logical that companies will liquidate a large portion of their raised funds to cover their costs and pursue the work on their projects.
This means that Ether tokens worth hundreds of millions of dollars are being cashed out - of course this will have an effect on the price!

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Reason #2: Bitcoin Scaling / General Cryptocurrency panic

The highly anticipated Bitcoin scaling is nearing on August 1.
After a long debate, the community has come to the conclusion to integrate SegWit with Bitcoin.
SegWit stands for SegregatedWitness, it's a process which reduces the size of blocks on a blockchain, by removing signature data from the transactions.
Therefore, it adds additional capacity on the blockchain for more transactions and confirmations can be completed quicker.
This is important because currently, the Bitcoin network is overloaded, it can only manage 7 transactions per second so a lot of users are experiencing long delays for Bitcoin transactions.

No one can know for sure what will happen once SegWit gets integrated - which is why a lot of people have started to panic-sell their coins.

This is probably one of the reasons why we have seen declines in Bitcoin prices, as well as prices for most other cryptocurrency in the past weeks.

This has also effected the Ethereum price, as it dropped from it's all time high of $390 to roughly $180 in just 1 month.

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Reason #3 - Tezos

This is probably not as big of an influence as the other two, but still notable.
A few days ago, I have written a post about Tezos - a revolutionary new kind of blockchain that concluded its ICO last week, with a record-breaking sum of $232 million.
Tezos has been nicknamed the "new" Ethereum and might become Ethereum's biggest rival since they're both smart contract platforms.
Tezos has solutions to many common blockchain problems - it offers even more security and transparency than the Ethereum network and calls itself a next generation, "self-amending cryptoledger".

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The future of Ethereum

So what does this mean for the future of Ethereum?
In the long run, it's still likely that Ether prices will rise again. It still remains the 2nd largest cryptocurrency, and many people are actually waiting for "The Flippening" - the time when Ethereum's market cap will actually surpass that of Bitcoin.
This would mean that for the first time ever, another cryptocurrency would replace Bitcoin at the very top!
Some people say this will never happen and others are totally convinced that it will happen soon, but actually, the Flippening might actually be among us: if you look at the market cap ranking, the majority of coins from the top 15 are already based on Ethereum!

Shift of consensus

Ethereum's creator Vitalik Buterin has already announced that Ethereum is planning to scale the network by switching from its current proof of work (PoW) consensus protocol to proof of stake (PoS).
Apart from that shift, they are reportedly working on other ways to scale the network as well.

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What's your opinion about the future of Ethereum? Do you currently hold ETH ?




Images: 1, 2, 3, 4, 5, Sources: 1, 2, 3, 4



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Informative but ETH goes up today :)

great blog @sirwinchester I love to see to reach 50 $ again so I can ride on the boat again,,, great read upvoted!

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Would love to see that too, but doubt that it will happen without some major manipulation via CoinDesk & CoinTelegraph. As one of our guys wrote several weeks ago - It's likely that ETH is undervalued because it is being used as an exchange token, rather than a fuel or escrow platform.

Then again, maybe ETH's creator was a bit naive (or overly optimistic) to think that Ether would be an economical blockchain fuel...

yesterday time to buy, today probably sell and you get a little of gain

Nice layout of the last month!

I personally think the switch to POS will be the death of etherum!

It's really crazy what's happening for the time being @sirwinchester! Will it rise again? Or it is the end? Is it some kind of strategy? So many questions rising up!
Thanks for this great analysis
Cheers
@progressivechef

I think BTC will stay number 1 and LTC will rise to number 2, leaving Eth at 3rd. I feel this way due to the finite and deflationary basis of BTC & LTC. Eth is inflationary and has no true finite limit...much like Fiat Currency. For that reason I am sticking to BTC & LTC and avoiding Eth.

great post...

Awesome read @sirwinchester ! I have been having this battle in my head whether to do my own "flippining" and get out of ETH for good, as I feel its more well invested in either steem, SBD, LTC, or EOS! I feel EOS is very promising, only time will tell. UPVOTED! Thanks again bud!

Its nice to see A LOT of green on the charts today!

Hey hey good sir, these are astute observations.

In thinking about this recently I found that I agree with the idea that they're cashing out to fund their projects. It's also summer, so I'm sure that plays into it like it does every year.

Also, for the first time, just this month, I traded ETH for other crypto... there IS a lot you can trade ETH for these days!

How did you handle the bloodbath this last weekend when BTC was USD 1850's? I went crypto shopping ;)

I've sold all eth, for profit. I think it'll go lower tbh. It hasn't proven value, it was pure speculation. Bitcoin has value, it is getting too low and will be driven up because of that.

When ethereum drops the bass

20%+ recovery today, but who knows what we have in store for later this week. I think the road is still rocky ahead

As illustrated in the picture, ICO is actually the hammer striking down the worth and value of eth. Lets see where we've got to go after the btc scalling. but if ICO is not controlled it may put the future of digital currency in jeopardy because it is fast becoming a tool for scamming and legal defrauding

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but if ICO is not controlled it may put the future of digital currency in jeopardy because it is fast becoming a tool for scamming and legal defrauding

You're saying ICO's should be manipulated by some authority? Maybe code? Because that will stop scamming and legal defrauding?

ICO's were possibly responsible for the price of Ethereum reaching $400.00 as many required the trade from Ethereum, price should recover back into $200.00 soon and higher thereafter, but time will tell.

The price went up 3000% in 3 months, then drops 50% and people wonder why.

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This is not a correct way to do maths...
If something raises 3000% from $1 to $3000 and then it loses 50%, it does actually have a value of $1500, so, put the number 3000 and 50 is a very bad indicator. It would be more correct to say "it went down from a raise of 3000% to a raise of 1500% since the beginning of the year"

ETH seems to be recovering some today.

fixed as of this post. everyone just wasted 2 hours.

I think # 1 and #2 points are correct, most of all #2.

i think LTC have more bright future

Super information thank you

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Yes it seems that all cryptoassets are somewhat correlated, meaning when we are in a bull market you can literally close your eyes and pick a coin and it will go up. The exact opposite is true in a bear market where even the most high quality projects like Ethereum get slaughtered. For me it is important to have a long term perspective. Everyone generally agreed we were in for a correction but hopefully this will look like a blip 3+ years from now. HODL!

Great post dude, would love your feedback on my coinclub piece showing our trade action in the last 7 days. Cheers!
https://steemit.com/introduceyourself/@cryptocoinclub/my-first-crypto-coin-club-trade

I remember when Bitcoin was first time 400 then it dropped then it went to 800 then it dropped and people were saying Bitcoin is finished... now Bitcoin price was 2400 so I think Ether is just in the very begening!

Nice article and analysis. I feel a lot of uncertainty on both major cryptocurrencies. In my humble opinion, Bitcoin was not designed to be scalable but as an experiment that turn out more than great. For Ethereum, I have some concerns more linked about the governance and the way things are unstable for rules, rewards just to name a few.

Great post, not sure if ETH will stay in second though with so much strong competition! Could really see LTC taking over

“Ethereum's creator Vitalik Buterin has already announced that Ethereum is planning to scale the network by switching from its current proof of work (PoW) consensus protocol to proof of stake (PoS).
Apart from that shift, they are reportedly working on other ways to scale the network as well.”

Any idea when?

Hi
I wonder if someone can tell me the differences between POW and POS protocols?
Thank you.

Since I am new to crypto, I have a question that bothers me a bit.....I still fail to see why Eth movements are so closely linked to Btc especially since the past few months?

Ethereum, EOS or Tezos ... who will be King of the Hill in 2018 ?

As a novice in this space I more or less sit in on conversations like this to grow my knowledge. My first thought was that some really deep pockets (Elite) used Ethereum's smart contracts against them to trigger billions in sell from a host of holders to shake confidence in it and they will again. Because of it utility the resistance level and Mkt Cap will grow by billions each round higher. This is "from the mouth of babes"

Good post. Thanks for bringing this to our attention. The biggest group of uneducated investors in mankind get's a shot to determine the price of a crypto. It's an interesting world we live in. I was wondering if anyone of you uses: https://www.coincheckup.com Since I use this site I make so much less basic investment mistakes. Go to: https://www.coincheckup.com/coins/Ethereum#analysis To check Ethereum Investment research report.