Ethereum had the intention of taking the throne from Bitcoin. It had smart contracts, not to mention it offered faster transactions. But on Wednesday, Bitcoin has solidified its dominance in the market with a 58% market share.
Ethereum fell by 8% to a low of $170.34. It has experienced around a 90% drop since January. Despite the volatility of the crypto market, Bitcoin remained more or less stable while Ether, on the other hand, plummeted by 45% in a 30 day period. According to Mati Greenspan, who works as the senior market analyst at eToro, “In this case, Bitcoin is acting like more of a safe haven for cryptocurrencies—it’s kind of consolidating”.
ICOs Cashing Out?
During the first two weeks of August, many have speculated that initial coin offerings were to blame for the bearish trend. In 2017 and 2018, startups were able to raise billions of dollars using ICOs. The funds were denominated in Ether. There were speculations that ICO funded startups liquidated their ETF ran away with the funds that they have come up with.
However, if you are going to take a closer look at the research made by Diar, ICOs still hold around 38% of the raised amounts. On the other hand, 62% have either been sold or moved. This could potentially explain as to why Bitcoin remained stable while Ethereum dropped in price.
Contrast from Last Year
Ethereum’s performance in the last 30 days is a complete opposite of its performance last year. There were retail investors who were excited about the possible utility of Ethereum compared to that of Bitcoin. To give you an insight regarding its growth last year, Ethereum started 2017 at $8 only to skyrocket by 9,000%.
It is quite possible that Vitalik Buterin’s comment last weekend may have spooked investors who are holding on to their Ether. He mentioned that “There isn’t an opportunity for yet another 1,000-times growth in anything in the space anymore”. He also added that “the blockchain space is getting t the point where there’s ceiling in sight”.
If you are going to ask eToro’s Greenspan, he said that “The fact that Vitalik is less bullish could be causing some to sell and it stands to reason that most of his devout followers will be holding Ether”.
Timothy Tam who is a former Goldman Sachs analyst thinks that the short-sellers are also putting pressure on the crypto market. There are a lot of people that are betting against Ether. Tam mentioned that “Retail investors were completely euphoric a few months ago. Now, that emotion has flipped and they’re panicking”. He added that “shorts are going to ride that wave”.
You can also blame regulatory changes for the recent bearish trend on Ethereum. Though it has been considered a commodity by the Securities and Exchange Commission, ICOs are under scrutiny. The agency chairman said that ICOs, many of which are built on the Etehreum blockchain, are considered securities and should be subject to the same rules and regulations applied on stocks and other investment vehicles.