On Sunday, September 9, Ether [ETH] traded the least it has ever traded since the start of the year at $185. This new low for the year is getting observers to start asking difficult questions of ethereum. What’s more worrisome is that this low didn’t come as surprise as the cryptocurrency has seen an almost steady descent in its prices over a couple of months now.
This downtrend is down to large sell-off by ICOs who launched on the Ethereum Network and held large amounts of ETH from the fundraising, according to several investors.
The Impact of ETH Sell-Offs by ICOs
Last month, Bloomberg sampled the opinions of some notable investors and experts in the cryptocurrency space on the matter. One of Bloomberg’s respondents was Biswa Das, who runs cryptocurrency quantitative hedge fund BloomWater Capital. He explained:
“These startups are raising a lot of funds but they don’t have treasury management or enough cash management experience, so they’re selling too early and causing a lot of pressure in the market,”
At the time, ether [ETH] had just moved south of the $300 mark signaling worse times to come. Santiment, a research website which compiles a selection of Ethereum-based projects, stated that startups spent over 110,000 ether days leading to that low.
As the bear market set in, projects sold off large amounts of ETH raised; in one case EOS was thought to have liquidated major ETH holdings in Bitfinex leading to a market drag. Did they do anything wrong?
Probably a Way to Prevent the Sell-off Problem
Recently, the jury was called on Augur’s decision to sell a million ETH it raised at $0.7 immediately after the fundraising. Put in perspective, had Augur sold much later, during the highs of 2017, it would have raked in over a billion dollars compared to the 700,000 it got two years back.
Augur co-founder, Joey Krug defended the project’s decision and gave valuable insights to preventing huge ETH sell-offs in the future. He explained that projects are not hedge funds and as such had to sell tokens received during ICOs to fund their projects.
Analysts suggest that projects did not liquidate the ETH they received mainly because they hoped to benefit from huge price gains cryptocurrencies including ETH were making at the time. Given the crash of ETH and most cryptos, that strategy has failed and money projects seem keen to cash out what’s left of their holdings at the same time leading to the downward price trend.
Ethereum [ETH] Price Watch
Ethereum’s native token, Ether has since bounced improved from the yearly low; it is trading at $198 and looks set to end the day in a similar price like the previous day.