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Blockchain Cryptocurrency Research Ethereum ETH Price Usage

Low Amount of Sustainable Usage Pushes Down ETH

08/13 – 08/19

Low Amount of Sustainable Usage Pushes Down ETH
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WEEKLY RECAP

  • Total market cap. reached $212.29bn (a 1.1% decrease), where 7 day trading volume surged 1.7% for top 100 crypto


WEEK AHEAD

  • 20 Aug: ETC to list on Bittrex
  • 21 Aug: The U.S. Senate Committee on Energy and Natural Resources to host a hearing on “Energy Efficiency of Blockchain and Similar Technologies”


THOUGHTS OF THE WEEK

Ethereum (ETH) hit a new 2018 low this week of BTC0.042. A number of factors seem to have impacted this price trend.

We believe the severity of this price slump to largely be a result of exiting ICO project owners, who decided to cash out ETH into BTC or fiat currencies in the recent market downturn. Such decisions could help explain the recent volatility of ETH over BTC, as noted in our Chart of the Week. The project stage of projects pursuing ICOs is becoming increasingly immature, and 57% of ICO projects began fundraising with nothing more than an idea in Q2 2018 (versus 47% in Q1 2018). This implies more projects with limited resources committed, resulting in lower costs of exiting.

The cashing out of ETH supports Vitalik B.’s statement on low actual sustainable usage of blockchain, with ETH’s current primary use case being ICOs, and 95% of ICO tokens are currently built on the ETH platform. It is worth noting that 50% of ICO projects raised less than USD 10mn in Q2 2018 (versus 28% in Q1 2018). This relative inability to raise funds is a result of declining investor confidence in the ICO market, which in turn is caused by the deteriorating return on investment (ROI) where the median ROI of ICO projects in Q2 2018 is
-55.38%, compared to +49.32% in Q1 2018.

Despite the recent price slump, the outlook on ETH remains relatively optimistic in the ETH developer community. Vitalik B. recently published a guide to 99% fault tolerant consensus, along with his long term vision for the crypto community to do away with proof-of-work. He also highlighted the development progress of Casper FFG, which is currently under academic review before finalization. Joseph Lubin (ETH co-founder) also stressed that developer activity on ETH rose by “two orders of magnitude” since 2017 and believes that hundreds of protocols will co-exist with ETH in the future. Still, we can only but assume that the timing of these comments and announcements is partly due to added pressure on developers by both the hard hit ETH price, and the crypto public which is expecting to see Ethereum used for more than ICOs.

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