In what continues to be a volatile and unpredictable Summer for cryptocurrencies, Ethereum has suffered a series of setbacks over the past several days. The price of Ether has dropped forty percent since the beginning of the month amid a series of anti-crypto moves by state agencies and negative publicity. This is a stunning reversal for the second most valuable cryptocurrency, which only three months ago was poised to overtake Bitcoin in both market share and popularity. Nevertheless, Ethereum’s current troubles do not appear to be long-term issues. The platform remains technically strong and will likely continue to see growth moving forward.
Ethereum’s decline began at the beginning of the month when China’s central bank announced a ban on Initial Coin Offerings (ICOs). Officially, the ban is to prevent illegal activity and is widely regarded as an attempt to rein in the rapidly growing crypto movement in China, which threatens to undermine China’s tight currency and economic controls. The ban came as a surprise as Chinese authorities had earlier appeared to be embracing cryptocurrency and blockchain systems. Since the ICO ban was announced, BTCC, China’s largest exchange, has announced that it will soon cease domestic operations. This act is rumored to be under orders from Chinese authorities.
News for Ethereum worsened when South Korea’s Financial Services Commission issued a statement declaring that it considered cryptocurrencies to hold no value as either currencies or financial products. This news came after a meeting between several South Korean financial agencies. The commission also stated that it considered raising funds via cryptocurrency to be illegal under South Korean law.
In addition to these official positions, Ethereum has recently received negative publicity. A representative of the United Kingdom’s Financial Conduct Authority has issued a stern warning for ICO investors; noting that ICOs are extremely risky and lack regulation. Even Vitalik Buterin, Ethereum’s creator, has acknowledged that an ICO bubble exists and that the market will “need to cool down.”
It is thus not surprising that Ethereum would be negatively affected by recent news. Other similar platforms, notably Waves and Neo, have also seen significant drops in value; both in fiat and in relation to Bitcoin. For example, Neo has declined sixty percent since its mid-August high of $47 and is currently trading at under $19.
Although investors and crypto advocates are wise to be concerned about Ethereum’s current troubles, there is plenty of evidence to suggest that it has a bright future, along with other similar platforms. First and foremost, the price of Ether, Ethereum’s internal currency, does not necessarily reflect network activity or interest from developers. This year has seen a multitude of institutions take interest in Ethereum, and this interest is growing despite state players seeking to slow or stop it.
Ether’s price drop appears to be part of a general price correction across the crypto space. All major cryptocurrencies have dropped this month, including Bitcoin, which has fallen below $3,500. Crypto volatility is quite common and the current decline is based on bad publicity as well as the BTCC shutdown. Despite a major price correction, it has been a very good year for investors. Ether is up more than 3,000% since early January, a fact that makes the current decline appear trivial.
As the market matures, investors will inevitably begin to place greater value on the utility and functionality of individual cryptos. In that context, Ethereum is in a very good position. As a comprehensive blockchain platform, Ethereum has never been more popular. It is likely that both its team, and those seeking to adopt it, are little concerned with the current price of Ether. Although it is difficult to predict future prices for any cryptocurrency, as a platform, Ethereum has the fundamentals to strengthen and grow.
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