Why is the Crypto Market So Bearish on ETH?
Ethereum is stuck under $300 at 2017 prices and losing value against Bitcoin and most alts here in early Sept 2018. Thus it begs the question, “is Ethereum Dead?”
To find out why the market is so bearish on Ethereum and ETH let’s look at what Ethereum is, Ethereum’s history, and its current challenges.
Ethereum is a distributed computing platform that many crypto tokens and crypto products in general are built on.
The native cryptocurrency token on the Ethereum network is Ether (ETH).
ETH is the #2 token by market cap and a popular trading pair on alt exchanges. Meanwhile the Ethereum network is the top network for ICOs and DApps (distributed applications) and was essentially the first-to-market when it came to general purpose distributed computing systems (other examples of distributed computing systems are EOS and TRON).
Put all that together, and you can generally understand why ETH gets the top value by market cap right under Bitcoin.
Now onto price history and current challenges.
First off, from a zoomed out historic point of view, Ethereum tends to make crazy headway against the dollar and Bitcoin and then fall back down again on its rainbow unicorn face, but in doing so tends to make solid gains over time (essentially not much different from other coins, aside from the consistency and growth Ether excels at).
Consider, Ether came out in mid 2015 and cost under $1, it is now $285-ish [when the article was originally published]. That is somewhere between a 250x and 500x return. So overall the price action is bullish AF despite the major pull backs of 70% or more at points.
Now, why did it pull back each time?
The short answer is “because crypto,” the longer answers are 1. “accumulation/distribution,” and 2. “market cycles are a thing, that is what happens when a coin goes up so much.”
Meanwhile, even longer answers look something like, “a myriad of different reasons that range from crypto tends to bubble and bust and take everything along for a ride when that happens,” “BTC cycles and ETH cycles tend to stagger making BTC/ETH the ultimate pair to trade back and forth if you can time it,” “sometimes ETH runs into speed issues, ETH needs some updates, etc.”
Whatever the case, with Ether the conversation tends to switch between wondering if Ether will overtake Bitcoin and wondering if Ether is dead. So far neither extreme has been true, instead the simple “ETH market cycles are a thing” answer seems to be the best answer.
TIP: BTC and most alts are in a bear cycle, and ETH is out of rotation. It is no surprise it is struggling in this environment, all cryptos are essentially. Crypto market cycles are a thing too.
Second off, with all the above in mind, let’s look at what is happening now.
What is happening now is that we have a bit of a cluster of things.
On one hand we have the bear market of 2018 and many ICO tokens built on Ethereum who raised Ethereum as capital panic selling (in theory, there hasn’t been a ton of confirmed reports of selling, it is just basic logic paired with some word-of-mouth evidence).
On the other hand we have a cluster of “Ethereum 2.0” updates needed that aren’t ready yet and some resolutions for updates that the market didn’t immediately respond positively to (specifically devs are going to delay a difficulty bomb and reduce the amount of ETH given as mining rewards).
The reality is, although you could say a slower speed is a feature in terms of security, Ethereum is hardly the fastest DApp platform out there today (yet it does have the highest market cap).
Further, there is a rumor CBOE Ethereum futures are launching in late 2018. The rumor of BTC futures caused the epic pump of 2017 in crypto, but it also set the stage for the 2018 bear. Perhaps traders are weary of this happening again.
Ultimately then, we can sum this up as saying “ETH isn’t dead, but there are some technical and fundamental reasons for the current drop.”
Exploring the arguments against ETH: I should note the arguments of the Ethereum permabears (almost always big investors in competing projects) who say things like “the collapse of ETH is inevitable.” They offer reasons like, “because what if the popularity of the Ethereum of the platform is very good, but the ETH token isn’t needed, and thus ETH goes to zero” and/or, “what if a better network takes Ethereum’s place, like the other computing system with smart contracts that copied Ethereum and also has a diamond shaped logos,” and/or, “Ethereum is too slow, the updates are too far away, there is no reason to use decentralized system, and there is no killer app.” Etc. etc. I think these claims mostly deserve a hard eye roll and shoulder brush, the same way I think the idea that Nikola will beat Tesla, or Telsa will drop to zero, are overly bearish propositions for the top EV company everyone is trying to copy. However, you should feel free to explore the uber-bear’s ETH collapse theories (the previous link is a good starting point).
Opinion: When see ETH at a low, hear that ETH futures are launching, and see devs updating the system…. I get bullish and want to make contrarian plays. However, it could get a lot worse before it gets better, “because crypto,” and thus one needs to approach any contrarian play carefully. ETH in my mind will no doubt be the star of some future cycle, but mistiming that can hurt.
Bottomline: Bitcoin isn’t dead, crypto isn’t dead, ETH isn’t dead, and honestly even some rando tokens aren’t actually dead. It is really just that crypto tends to have these bubble and bust cycles and ETH is currently busting. Thus, if I had to explain why ETH was down, I would say “because crypto” and then tell you that if you like a token you should aim to buy low and not high. If I had to answer the question is Ethereum dead, I would point to the chart and show you all the other times it looked dead and wasn’t. If I had to give the long answer, then I would discuss the updates, the futures, and the risk of jumping into a coin that isn’t currently in rotation (its something you want to do very carefully). Still though, I can see this future that looks like so many pasts where Ethereum is the hottest thing around and we are retesting all time highs and from that possible world, worrying about Ether being dead when it is potentially on sale seems a little silly. Crypto can be a mind trip. ETHUSD looks like it could be bottoming, ETHBTC looks shady as heck… we will see. The problem with focusing too much on price is that you can miss your chance to have part ownership of the token needed to use the Ethereum system if you don’t click the buy button at some point, and that means for example you’ll lack the gas and tokens to buy your Gods Unchained cards or to play around with Coinbase Wallet DApps. And for me, that is a real problem.