The Ethereum Market Capitalisation CrisisAugust 10, 2019
Bitcoin might be eyeing a new bull breakout in the past couple of weeks, but the second biggest cryptocurrency network has been struggling. For years now, ethereum has shown a trend of mirroring the big market moves, especially in regards to BTC. In the eyes of many ETH traders and investors, it was enough for bitcoin to move up and ethereum token would inevitably follow suit.
At the end of the crypto winter that took place over the spring of 2019, the same continued to unravel. As bitcoin rose to over $13,000 the movement was not lost on ethereum. In that period, it too climbed close to the $400 mark that was not seen in a long time. Naturally, a sell-off in the BTC market affected ETH as well.
Now, however, for all ethereum investors and developers, there is a worrying new trend they might not be accustomed to: ETH is not following the bull preparations of BTC. What makes the situation even worse is the drop in the market cap of ethereum. With these two factors, many are worried about the second-most important cryptocurrency network in the world.
The market capitalization of the ETH coin and the entire network has fallen below the levels that it had at one crucial point in its history. This took place just before the big bull run of 2017. Right now, the value of all ETH tokens accounts for about eight percent of the total crypto market. This is a sharp fall from grace for the network.
At the highpoint of its popularity, the platform for smart contracts accounted for about one-third of the crypto market cap. Back then, the same value was so crucial for many in the crypto domain that a whole new concept came about that market a significant part of 2017 – the flippening.
Memories of the Flippening
The idea that is now well and truly in the past was that ETH is on a course to overcome bitcoin. The flip – hens the flippening – would make ethereum the dominant cryptocurrency in the world based on market cap. Now, two and a half years later, ETH flipped to precisely 7.8 percent of the crypto market. It has not been this low since March 2017 and back then, not a fraction of current ETH holders likely knew this crypto token even exists.
But, the world of crypto was a different ballpark back then. Even as bitcoin was rising in its value astronomically, ethereum network value was propped up not by speculation of investors but by its technical characteristics. Like a smart contract, it was the go-to solution for anyone who wanted to build a token of their own. This characteristic of ETH token is the primary reason why so many believed it in more than bitcoin.
While BTC captured the imagination of the everyday individuals and investors as a vehicle for moneymaking, ETH captured the eye of the developers. This led to the rise of the ICO phenomenon and the entire cycle of investment that followed. Here, investors who wanted to buy XYZ tokens first bought ETH which then they used for the initial coin offer to get the other token in their possession. The pump led to many people buying ETH and giving it to the designers of an individual ICO. The price climbed and climbed as a result.
But there was a catch like there always is in domains like esports or any other cutting-edge technology that gets many users in a short amount of time. The growth of the field attracted the attention of the regulators. In the case of ETH, the ones that brought the hammer down where the Chinese authorities. By trying to ban ICOs they put a stop on the entire growth of the sector and thus, the demand for ETH dropped dramatically. In a couple of months, the start of the crypto winter was added to the downward mix.
As the flippening never happened, the reign of bitcoin continues. In 2018, money flowed back to the network as its token reached the sum of $20,000. Previously, bitcoin scaled up without a hitch and the split to bitcoin cash and then bitcoin SV happened without jeopardizing or critically wounding the original network. A problem for ethereum came from institutional players as well.
Organizations like the Enterprise Ethereum Alliance that showcased many huge companies showed that their members actually wanted to use private versions of the ethereum network. None of these no matter how successful would impact the value of the original ethereum network in any way. In other words, the dreams of a killer app, which many hoped for in 2017 were cut down drastically. At the same time, actual popular applications like CryptoKitties, which exploded in user numbers, showed that the network has some serious downsides.
A spike in network use from CryptoKeys caused the network to stop working. For many, the idea that ethereum already had the keys to the future blockchain empire that will change the world was dead and gone. Ethereum was just one more cryptocurrency riding behind bitcoin and as the months passed by, the distance between these only grew. Now, it looks like it will grow even further.
Scope of Ethereum Troubles
Many are now actively wondering if ethereum is beginning the start of its more serious downfall. Like always in crypto, those with doomsday predictions are usually proven wrong, so it is safe to say that ethereum will not vanish into thin air over time. But, it does need to capture the imagination of the developers one again.
The battle for the public is lost as long as bitcoin has a constant stream of free promo in the mainstream media, which almost never reports on ETH. Even bad publicity, in this case, blocks ETH from doing anything in that domain. However, the change that the network is building towards is the switch to the proof of stake concept. This in itself has a range of potential problems but right now, it appears to be the only long-term chance for ethereum to establish its position in the crypto space.