Did Ethereum (ETH) price drop more than its fundamentals?

Decred co-founder Jake Yocom-Piatt is convinced the ICO model “died” in 2018 and numerous failures have been recorded in the process. However, he also believes that 2019 will offer something exciting:

“2019 will not be about exciting new ways to use blockchains. It will be about which cryptocurrencies get the fundamentals right, organize their collective intelligence, and can endure the gyrations induced by ignorant prospecting. Just like during the dot com bubble, endurance matters. Those that survived the dot com crash stood tall over those who ran out of gas. It was those projects that came to dominate the space.”

After the 2017 and early 2018 bull market, ICO funding levels hit their lowest levels this year in Q3, dropping to new lows with every month. Many reasons have been suggested for this dry spell, from government regulation to investor distrust in the ICO model.

Ethereum, as the platform that hosted vast majority of ICOs, felt this tumble the most. Ethereum’s price fell to double digits, way below $100, a level nobody thought Ether would see again.

Alex Krüger, reputable economist with MBA from Columbia University, took on Twitter to examine Ethereum’s fate in the light of its price nosedive with a chief question to answer: Did prices drop more than fundamentals?

Krüger states:

Ethereum serves two purposes.

A) ICO launching platform.
B) Platform to develop an ecosystem of Decentralized Apps.

ICOs are half dead. The SEC has been killing them. But the SEC is simply accelerating the inevitable, as most ICOs were either scams or money grabs.

What happened is simple to understand. ICO promoters caught the fragrance of easy money and embarked on an unbridled $ printing race, by coming up with the most ridiculous ideas they could muster. Both the general public and venture funds gobbled these ideas enthusiastically.

Adding insult to injury, even many of the seemingly legit projects failed to deliver. What about the ones that did deliver? There’s a handful of Dapps to show for them. But it’s been almost two years since the beginning of the ICO madness, and Dapps barely have any users.

If projects had succeeded in delivering on useful Dapps, these would have created demand for gas, creating demand for ETH, creating the necessary natural buyers to balance the market against the natural sellers (miners, ICO treasuries). But they didn’t.

Natural sellers will always sell and put downwards pressure on price. And for as long as ETH has no natural natural buyers, it is a pyramid scheme, always in need of new incoming suckers to keep the price from crashing.

ETH prices did not drop more than fundamentals. Instead, fundamentals went to sh*t.

The tech may be improving. But at the moment there is no demand for the tech regardless.

Looking at investing? For investors, investment thesis usually comes 1st. So it is crucial to answer these two questions: 1) Will ICOs make a comeback? How? 2) Is there a new wave of succesful Ethereum based Dapps incoming?

Remember prices here are not necessarily cheap. ETH still is 10x higher than in Dec 2016. Do you know any assets outside of crypto that are up +900% in 2 years?

This caused a backlash by Ethereum advocates and people with opposing views. User that goes by the moniker Panek answered that Krüger started off with wrong assumptions so his conclusions are logically wrong, saying that: “ETH’s purpose has always been to be a stateful, more programmable crypto. It never intended to serve as an ICO platform. That use case arose from its programmability and decentralization.”

Intention and practical use are two different things – Ethereum wanted to be something else, and it might fulfill that vision at some point in the future, however it wound up being the ICO platform. And naturally, ICO fate become ETH fate which makes Krüger’s hypothesis correct. Nonetheless, Ethereum’s huge pool of developers is the guarantee it will be here in the future as well. The ecosystem is humming, new improvements and innovations keep pouring in and the ICO wipe out will be painful in the short run but good for Ethereum in the long term.

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Torsten Hartmann
Torsten Hartmann

Torsten Hartmann has been an editor in the CaptainAltcoin team since August 2017. He holds a degree in politics and economics. He gained professional experience as a PR for a local political party before moving to journalism. Since 2017, he has pivoted his career towards blockchain technology, with principal interest in applications of blockchain technology in politics, business and society.

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