THE ETHEREUM CHALLENGE

Ethereum is at the very core of the global blockchain economy. The fact that Ethereum supports smart contracts may be the largest part of the reason that almost all new tokens issued use the ERC-20 format working only on the Ethereum blockchain. This is also the likely drive behind the ETH price growth.

 

THE BLOCKCHAIN TURBULENCE

Starting at $20 in March, its value rose and peaked in June at $400 after it had more than doubled in May. Its greatest gain was in May when it rose from $90 to $230. Then it lost more than half its value in a flash crash in June – the crash in which its price plunged to 10 cents on the GDAX exchange. Something similar seems to be happening in July as well, albeit not that severe. Its market cap trails behind that of Bitcoin.

BTC and ETH may experience daily price volatility in relation to USD in a range of 10 – 20% a day. That may occur even if the general trend is upwards. This volatility, especially the rebounds, leaves onlookers perplexed. Recently the ETH price has reacted to the news of the alleged death of the Ethereum founder with a drop of 40% of its value. More commonly crashes are ascribed to massive sell-offs by large-scale investors.

 

THE OPAQUE DYNAMICS DRIVING THE PRICES

Still, it seems investors are confident of the long term benefits Ethereum is likely to bring. As Bitcoin is the trendsetter in the cyrpto market movement, can we expect substantial upheavals as the dreaded August 1 uncertainties, leading to a potential fork, arrive? That’s likely, but these technologies are here to evolve for the long-term and such bumps on the road are inevitable. Ethereum has already gone through four forks with no crippling effect. In July 2016 it even split into two separate tokens.

While we can only guess at the real causes of the recent price fluctuations, some observers have opined that it is due to companies selling ETH gathered in TGEs. There have indeed been large amounts gathered in the last months (the estimate is $1.2 billion) and ETH is not liquid enough for massive sell-offs.

 

SUMMARY

All the above raises questions about the suitability of ETH for TGE fundraising. It may be the best choice at the moment as the quest for stability continues, but the movements it has recently displayed are not for the faint of heart. Be it fake news, whales dumping, TGE sell-offs or just plain bearish sentiment, ETH lags behind in stability and liquidity compared to fiat and this leaves plenty of room for a viable substitute.

It also shows how much use there is in the crypto world for a stable cryptocurrency like the x8currency.

David Prezelj
David Prezelj

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