Ethereum (ETH) is the 2nd largest cryptocurrency by market capitalization. For the better part of the last two years, it was seen as one altcoin that could overtake Bitcoin in terms of value. Even as late as January this year, its surge left many believing it was only a matter of time before the famous “flippening”. But the general performance in Q1 2018 has been nothing but a downward trend that now has ETH teetering on the edge.
What is happening to Ethereum? Why is its price falling? Why are the prices of Ether in red today? And so on, have been common search terms in recent weeks. Though this is hardly confined to Ethereum, its stature in the market dictates that it should gain enough support to combat resistance. Yet as you may already be aware, the market as a whole is plummeting, and one of the coins with the most worrying trends is ETH.
For the third week running, the expected bullish run has failed to materialize, leading up to today’s price value of $376 against the US dollar. This represents a marked drop in the value of about 50% in the first quarter of 2018.
When juxtaposed to the performance it has had over the years, Q1 2018 leaves it with the worst aggregate performance of any quarterly results. Cumulatively, ether has lost almost 50% of its value in the last three months, dropping steadily from $956 at the beginning of January to the current value.
Incidentally, this is worse than its previous big drop of -40% registered in Q4 2016. It sounds like eons away from the massive +1,121% surge of Q1 2016 or the equally satisfying +527% and +489% registered in Q1&Q2 of 2017 respectively.
So, what could have contributed to the tanking of ether prices? While the slump can be attributed to the general decline in the market, events that occurred in February and March point towards it being somehow specific to Ethereum.
The good before the bad
At the time Ethereum hit its all-time high in late 2017, it had become the undisputed king of dApps and Smart Contracts. But it was how popular it had become with ICOs that gave it massive support. For most enthusiasts in the crypto world, the platform had the best chances of doing well due to the sheer numbers of developers it could attract. Its virtual Machine (EVM) network was/ and still is preferred when launching token coins, but some of the stardust washed away.
ICO regulations around the world
This actually began much earlier but gathered pace in February with the US SEC seeking to tighten the noose against ICOs. First, the talks were focused on how to regulate the industry to prevent token sales being used as money laundering platforms. However, in a quick turnaround of events, the SEC through the chairman Jay Clayton indicated that all ICOs could be classified as securities. That stance saw ETH values plummet to new lows of $574, before rallying to hit $982 on February 18. Since then, it has been a smooth slide down the slope to the edge of a cliff.
The ban on ICOs and cryptocurrency advertisements
It had been speculated upon for a while, but when it actually happened; prices across the market were crashed. Social media companies like Facebook, then Google made good their threat to ban ICO ads on their networks. The two behemoths were emulated by Twitter, which also indicated towards in mid-March that it intended to ban all such adverts. Although the entire market felt the pressure, it is likely Ethereum got hit more due to its link to ICOs.
At around the same time, prices fell sharply at the news that several ICOs were facing investigations from the US authorities. We all know how delicate the cryptocurrency market can be, and it’s not surprising that prices fell to $460 on 18th March 2018. Though it rallied to close the day at $538, ETH had already dropped by over 50%.
Bulls vs. Bears
In the short-term, it is expected that the market will rally as we approach the US Tax day in mid-April. It is, therefore, possible to see a mini-rally to take the prices back above the $420 level. If the bulls fail to combat the bears, then the worst may still have to come. Long-term, Ethereum (ETH) is still a very viable project and will continue to grow value-wise.