The Reasons for Ethereum’s Fall

Ethereum is a high-tech platform for developing decentralized applications based on blockchain technology. The primary focus of the project was the creation of the universal distribution system that would allow users to launch their ICO-projects and collect funds using the crowdfunding option. This allowed many talented developers without large amounts of start-up capital to tell the world community about their promising new ideas by creating websites containing concise information about their startups.

ICOs are usually provided on these websites, and all interested people are able to purchase new crypto coins at symbolic prices. If a project is successfully implemented and tokens are placed on cryptocurrency exchanges, their costs can multiply by a hundred times in a short period. These ideas attracted the attention of many investors as well as the entire crypto community, so the ETH market price spiked to $1,389 at the start of 2018 from an initial cost of $0.2. More than a thousand new crypto coins were created as a result by using Ethereum blockchain.

What Is Ethereum?

The idea of the Ethereum project belongs to the Russian programmer Vitaly Buterin. In 2013, he published an article in Bitcoin Magazine that presented his concept of the Ethereum platform. The essence of his hypothesis was the creation of a financial system is not state controlled but also capable of exchanging intellectual property and services between people around the world.

It was initially planned and created as a platform for developing distributed applications with integration into the Bitcoin blockchain network, but the Bitcoin crypto community rejected this idea. Then, Vitaly began to recruit a team of highly professional programmers to develop a new generation of high-tech blockchain, which would allow the use smart contracts when concluding deals.

In July 2014, a large-scale ICO was carried out that resulted in the sale of fifty million ETH tokens totaling more than $18 million. It significantly accelerated the development process and launched an early version of the Ethereum blockchain network called Frontier in July 2015. At the beginning of 2016, the blockchain protocol was further  improved, which allowed for automatic generation of investment portfolios that provided business people with the highest level of profitability.

In mid-2016, the system was hacked by intruders that managed to steal more than a third of all available ETHs from users’ accounts. Buterin’s team of developers made every effort to return stolen crypto coins, as well as eliminating this vulnerability in the program code. Much of the funds were returned. Greater protection against DDOS attacks and other malicious programs was applied in the upgraded Ethereum blockchain as a result of this experience.

In March 2017, the total daily trading volume of Ethereum reached $450,000,000. ETH tokens were offered on the Avatrade marketplace at $94.22 per 1 ETH. About a month later, the cost of one Ethereum coin rocketed to $400, showing a growth in price of about 5,000% since the beginning of 2017. Consequently, Ethereum was ranked in second place in terms of crypto coin market capitalization.

How to Mine Ethereum?

The explosive growth of ETH in price attracted many miners. They learned how to mine Ethereum and started to actively produce it with and thereby selling it on stock exchanges and transferring the earned coins into fiat money. These miners only used to sell ETH but never buy, so the offer of this crypto increased several times. This fact became one of the primary reasons for the degradation in value of Ethereum.

First of all, the Ethereum platform was created for smart contracts, not for mining. The system used an encryption algorithm, which required video cards with a considerable amounts of RAM for mining. For that, miners used graphics processors (GPU), which are common in the processing of 3D graphics for video games. A result of this  increased demand was the cost of these processors which has since grown dramatically. It was also necessary to take into account significant electric power consumption that bitcoin miners used.

In addition, Ethereum announced the possibility of transferring to a new algorithm at an undisclosed time, leading to an  instant devaluation of the cost of pre-existing generated blocks. Therefore, since the beginning of 2018 most if not all cloud mining services have ceased working with Ethereum.

How High Will Ethereum Go?

Actually, 1 ETH currently costs $206.34. At present, experts predict a steady increase of ETH in value. However, the sharp rise in cost is not currently expected . Etherium today, is considered one of the most steady cryptocurrencies due to its inert movement which is not significant, and experienced programmers are continually improving this platform. So, the question of how high will Ethereum go is not relevant as it used to be.

In 2019, the developers of this Ethereum are planning to undertake a number of measures to strengthen the ETH rate, namely by empowering the platform, increasing the rate of the transaction speed, additional security system improvements and cooperation with many Internet websites selling goods and services.

Why Is Ethereum on a Downward Trajectory?

So, why is Ethereum crashing? A large number of factors have hurt the ETH price. A correction ultimately follows any significant growth in rate. The unexpected surge in cost increased by 1,000% in a few weeks without a following correction. The fall in Ethereum price was also due to a hacker attack that  broke into the South Korean exchange BitHumb three times during 2017-2019 period. Trades of ETH on this cryptocurrency exchange featured huge volumes. It was typically, more than 13.5% of the total number of ETH tokens. In 2017, very wealthy bidders often sold massive amounts of ETH which resulted in offers significantly exceeding demand.

Bitcoin also  largely influences the rate of every cryptocurrency, including Ethereum. The uncertainty related to Bitcoin affected the ETH cost. Another reason why Ethereum is on a downtrend is the technology utilized for this project is becoming unreliable. Ethereum blockchain already lost its stability and immutability when developers decided to roll back transactions in blockchain to recover stolen tokens. Ethereum, like any other ecosystem, needs a constant flow of new investment. However, investors are reluctant because of the uncertainty and concern that something unexpected may happen  again with this cryptocurrency.

Is Ethereum a Good Investment?

After the price collapse in 2018, traders doubted the feasibility of investing in Ethereum.

They also,can more or less see predicted earnings in this segment. Different news and rumors have been strongly circulated that affects the cost of cryptocurrencies.

If we consider stock day trading business, its primary advantage relies on the ability to exercise complete control over open exchange transactions. For decision making in day trading, technical analysis of price charts is used. In the liquid stock market, every minute of every trading session can bring a trader the opportunity to earn a quick profit.

Dave Muree


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