Ethereum has been going through a rough patch lately with regards to its Ether [ETH] price. Currently, at $285, ether price has experienced a downward trend that traces back to mid-May when the price was just over $700.
And though the entire cryptocurrency market still reels from the after-effect of the major crash that happened between December and January, ethereum seems to be suffering a rather peculiar problem as it latest dip does not reflect the situation with bitcoin and many other altcoins.
When compared to bitcoin [BTC], ether’s malaise becomes pronounced. Last month, BTC gained roughly 2.5% on its value while ETH shed 17.5%.
This assessment leaves us with the question. What’s going wrong for Ethereum?
ICO Sell Off
At the height of the cryptocurrency fervor last year, many crypto startups raised funds through Initial Coin Offerings. Now this entails creating and selling tokens in exchange for funds which could be in fiat or cryptocurrency like BTC or ETH.
Most of the crypto tokens created in this period were deployed on the ethereum blockchain which meant that the issuers most often received their investments in form of ETH.
These ICOs which went live on the ethereum network and held ETH from the fundraising session are reportedly selling off causing a consistent downturn in the ETH market. According to some reports, the failed ICOs would most likely cash out, while others in advanced stages of their project are also selling off to fund the project.
Precautions associated with Bear Market
For most of the time this year, cryptocurrency have been in the bear market. In situations like this, investors are likely to turn to the most reliable asset of the pack. And, that is bitcoin.
In this light, Bitcoin dominance over other cryptocurrencies rose to over 60% meaning that ethereum and all other altcoins account for 40 percent of the entire cryptocurrency market cap. The charts from last year tell a different story as the dominance of bitcoin dropped considerably from over 90 percent to 35 percent at a point.
Competition from Newer Blockchains
Ethereum became widely known as ‘the’ platform to deploy decentralize apps (DApps), deploy smart contracts, and launch ICOs. While it still does all these, ethereum faces stiff competition from blockchain networks like EOS, NEO etc who position themselves as better platforms to launch DApps. These platforms striving for the title of “Ethereum killer” may now in reality be killing Ethereum.
The Introduction of ASIC Miners
There’s also the effort by Bitmain to go into the Ethereum mining, releasing its first dedicated mining rig for ethereum. ASIC miners, which is what Bitmain represents, is bad news for any cryptocurrency like ethereum which wants to remain as decentralized as possible.
With its application-specific mining equipment, a large enough pool of miners, Bitmain can compromise the very decentralization of ethereum, which is its very backbone. This definitely gets Vitalik Buterin worried, but the price of ethereum shows that he’s not the only one that is worried
Delay in Release of Scaling Solutions
One news that is sure to bring some confidence in ethereum market and galvanize and upturn prices is that of a major release that addresses its much-talked-about scaling problems. Buterin and his team are working hard towards a release of solutions like Casper. The longer these solutions remain in the lab, the more likely the market would lose confidence and this shows in the price of ETH.