Ethereum Caught In Mega Bubble
The cryptocurrency market capitalization has fallen from a high of $830bn to a low of $470bn in 7 days and the price volatility of Ethereum and others is not letting up (neurotic about the price of Ether? See our new rapid-updating live price). Ether has fallen by more than 40% from its high of $1,422.47 last week; finding itself caught up in a market-wide bubble that has now come to an abrupt end.
This latest crash has wiped out a month of price gains; gains that were driven by some of the most exuberant spending ever seen in the history of crypto. This exuberance was summarized by a short and very worrying question from an Uber driver last week.
I’ve just lost my full-time job and I have £1,000 left on my credit card… Which cryptocurrency should I buy?
As if this question wasn’t jaw-dropping enough, the coins that he was “recommended” by a friend transpired to be TRON, Cardano, Stellar and a few I had never heard of. Trying to explain that investing in a “safe” cryptocurrency like Ethereum or BTC is risky enough, and that debt-based cryptocurrency investing is border-line insane was futile – the driver was convinced that these coins were the road to riches. That £1,000 of credit would now – a few days later – be worth just a fraction.
There have been countless bubbles in this asset’s 9 year history. Bitcoin has – on more than a dozen occasions – lost 30% of its value overnight before ultimately climbing to new highs. The last 24 hours may come as a shock to many, but without seeing a fundamental change in the technology, these price movements are entirely pedestrian. The only difference this time around is that crypto is a much bigger beast; the panic is global and the fear is visceral. Numerous articles have spawned warning investors to “stay away from crypto” and Warren Buffet was recently quoted as saying “cryptocurrencies will come to a bad end” – as if to imply that they’re all the same; BitConnect (a crypto-ponzi which collapsed yesterday) is not equal to Ethereum, but I’m sure Mr Buffet knew that.
Ethereum, in fact, is in its own league. It accounts for ~49% of all USD value moving across blockchains. It is responsible for over half of all blockchain transactions. It attracts more developers than any other blockchain and ConsenSys (founded by Joe Lubin) has a team of over 400 people dedicated to developing the Ethereum ecosystem.
Ethereum will one day decouple itself from the rest of the market. Its value will begin to correlate with other factors beyond Bitcoin’s price, regulatory scares, ponzis and a rush of money into blockchainless tokens. But for now, the price of Ethereum will continue to go through the same market-wide ups and downs that we’ve seen today.
In the meantime, there is a lot to look forward to in this space. This quote from Vitalik Buterin (posted to TechCrunch.com) gives some exciting insight into the year ahead.
I expect 2018, at least within the Ethereum space that I’m best able to speak about, will be the year of action. It will be the year where all of the ideas around scalability, Plasma, proof-of-stake, and privacy that we have painstakingly worked on and refined over the last four years are finally going to turn into real, live working code that you can play around in a highly mature form in some cases on testnets, and in some key cases even on the public mainnet. Everyone in the Ethereum space recognizes that the world is watching, and we are ready to deliver.
Recent news that may be related to the latest cryptocurrency crash include:
- Trading ban rumours emerge from South Korea (later rephrased to “stricter regulation”)
- Warren Buffet will “never invest in Bitcoin”
- One of the world’s largest cryptocurrency exchanges goes offline for 3 days. Sidenote,
during this period we had to take the Kraken price of Ethereum offline – it is now up and running again