At press time, the second-largest cryptocurrency by market cap and the number one competitor to bitcoin is trading for approximately $258. This is the currency’s lowest position of the year.
Ethereum is not alone in its present descent. Bitcoin has also fallen by about $200 over the last 24 hours and is currently trading for roughly $6,090. This is a slight improvement over where it stood late last night, as bitcoin had previously fallen below the $6,000 range to briefly trade for about $5,900. Ripple – the world’s third-largest cryptocurrency by market cap – has also fallen by about 14 percent over the last few days.
While not speaking for other forms of crypto, many analysts believe that the drops in Ethereum’s price stem from massive liquidations of initial coin offering (ICO) funds. Many startup ventures utilize ICOs through the Ethereum blockchain, meaning traders and investors offer ether tokens in exchange for whatever new asset the companies in question are putting out.
These companies are now selling the Ethereum funds they earned in exchange for fiat capital. It’s a popular business method, particularly for new cryptocurrency ventures, but it can have devastating effects on the currency’s price.
Matthew Newton – analyst at the online trading platform e-Toro – explains:
“The crypto market seems to have hit panic mode, with prices falling significantly across the board. As we can see in the case of Ethereum, investors seem to be increasing liquidations of their ICO holdings, with significant drops in price and increased volumes. This has had a knock-on effect on the rest of the cryptocurrency market, with bitcoin also momentarily dropping below $6,000 late last night. With prices hanging in the balance, emotions will be running high among traders.”
While Newton stops at the idea of crypto affecting crypto, Eiland Glover – CEO of crypto firm Kowala – goes even further by saying that countries like Turkey and Venezuela – whose economies remain vulnerable to outside manipulation and influence – are witnessing their entire financial infrastructures potentially affected by the crypto declines.
He says that these regions largely depend on digital currency to remain stable – more so than other nations, and the drops they’re now experiencing affect how these countries survive and do business.
“As crypto markets circle the drain today, with many of the more popular cryptocurrencies falling to levels not seen since November of last year, many of the more cautious investors may be looking to cut their losses and move on from the troubled asset class. What is often and regrettably overlooked by everyday traders is the financially liberating nature of this technology, which has been nothing short of a miracle for those in equally unstable economies like Venezuela and Turkey. While your average trader on Reddit or in a family office may be taking a hit this month, the true sufferings are those who are seeing their life savings plummet yet have no trustworthy fiat alternative to turn to.”
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