June proved to be an interesting month for the world’s second largest cryptocurrency, Ethereum. It reached some dizzying heights, and sank to some incredible lows. The graph below helps illustrate the volatile changes,
Price in US Dollars
Source: World Coin Index
Despite reaching past 4000% gains in 2017 alone, people are still expecting more from the crypto. Some have already tipped that it will overtake bitcoin by the end of 2018. Currently, however, it’s still going through some growing pains.
What happened to the Ethereum Price in June?
There have been a number of reasons for the shifting price in Ethereum. One of the most bizarre situations occurred on June 21 when a ‘flash-crash’ saw the price hit $US0.10 on GDAX (a crypto exchange site). Apparently a multimillion dollar sell order resulted in a domino effect of stop-loss orders that dropped the price 99.9% in less than a second. It doesn’t get much more volatile than that!
But, this was a mere anomaly among a range of broader problems. Coinbase, another website for crypto trading, has been linked to price dips as well. The site has gone offline several times throughout June due to high volumes of traffic. Though these technical troubles are annoying, they should be gradually ironed out.
Instead, it appears that Ethereum’s popularity could be the real issue.
Initial coin offering’s or ICOs are the trendy way to fund your latest projects. By setting up a new digital currency through an ICO, you offer investors a way to fund your idea. Like any cryptocurrency they have to use a blockchain, and most ICO’s nowadays are using Ethereum’s blockchain.
These ICOs cause a frenzy of transactions, which can weigh down the entire system. Transactions take time to confirm, and the raw computing power needed at this point can be staggering. It’s an issue that is heavily debated amongst the crypto community. But that is a discussion for another time.
The real problem occurs when the team behind the ICO decide to cash out their ether, though. This will put downward pressure on Ethereum’s price when they trade it for fiat currency. At the moment it has no easy fix. But it’s an insight into why Ethereum has been so volatile over the past month.
Where will Ethereum head from here?
That is the ultimate question. No one is really certain, but there has never been a better time to invest in crypto. And with all these new coins there is a lot of different options out there.
It’s something Sam Volkering, our cryptocurrency guru at Money Morning, knows all about. He has been following the crypto markets for over six years now, and he knows how to sort the trash from the treasure.
If Ethereum’s success this year excites you, we think you’ll love Sam’s new project. Keep an eye out for its launch this Wednesday. It could be a once in a lifetime investment opportunity.
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Junior Analyst, Money Morning