Tuesday, July 11, 2017
Cryptocurrency Ethereum is crashing
LONDON — Ethereum's price crash has extended to a second day, with the cryptocurrency down more than 15% in early trade on Tuesday.
Ethereum and bitcoin have both rallied strongly since the start of the year, with Ethereum rising over 5,000% from around $8 in January to a high of over $400 on June 13. The cryptocurrency has been boosted by the rise in popularity of so-called "Initial Coin Offerings" — a money-raising method that uses Ethereum's network.
However, Ethereum fell around 10% on Monday amid talk of a potential price bubble. It is down just over 15% against the dollar to $ at 8.47 a.m. BST (3.47 a.m. ET):
Mati Greenspan, a market analyst with trading platform eToro, told Business Insider over the phone on Tuesday morning that the crash has been "a long time coming."
"Anything that goes up that far, that fast has to have some sort of correction," Greenspan said.
Greenspan said: "Currently on the mind is ICOs. We've been seeing a lot of money get ridiculous amounts of money."
Startups, some at an incredibly early stage, have raised over $1 billion so far this year issuing new digital currencies that have been created using the Ethereum network. Greenspan said that scepticism over these projects could be contributing to the price correction.
He added that many of these the people behind these ICOs could be trying to cash out of Ethereum, flooding the market with sell orders and thus depressing the price. (When a company raises money through an ICO, it generally raises either Ethereum or bitcoin, which then generally has to be converted into a currency like the US dollar or British Pound.)
"There have been some very large sell orders," Greenspan told BI. "I'm sure some of them have the finesse to spread out their orders but some people don't."
A large sell order was blamed for an Ethereum "flash crash" in late June, which saw the digital currency drop from around $300 to as little as 10 cents in a matter of minutes.
In his morning markets email, Greenspan said on Tuesday: "This is by now by far the largest pullback the cryptomarket has ever seen. If not by percentage than certainly by market cap.
"The total market cap of all (812) digital assets, as reportedhas come from a peak of $116.5 Billion in mid-June all the way down to less than $78 Billion today."
Bitcoin is relatively stable on Tuesday morning, down 0.67% against the dollar to $2,328.97 at 8.57 a.m. BST (3.57 a.m. ET).
Ethereum was set up in 2014 by a group of programmers who wanted to tweak the system that runs bitcoin. Ethereum is an open source network that allows people to write "smart contracts" on it. Ethereum is powered by the cryptocurrency Ether, which is traded on the network and exchanged as a store of value.
Get the latest Bitcoin price here.