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Ethereum: Current Struggles and Future Hopes

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  • Anatol Antonovici
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    The second largest cryptocurrency by market cap has moved in a sideways trend during the last month

Ethereum: Current Struggles and Future Hopes
Cover image via u.today
Contents

The cryptocurrency market has stabilized in the last few months, with more institutional investors stepping in and more regulators trying to comprise the new industry into their legal frameworks. Ethereum is no exception — the second largest cryptocurrency by market cap has moved in a sideways trend during the last month.

If we watch the larger time frame to assess the longer-term trends, we’ll see that ETH has lost over 72% since its local peak from May 5, 2018. One might think that Ethereum simply followed the trend of the cryptocurrency market as a whole, which is closely watching every movement of Bitcoin. However, the largest crypto-coin by market cap has lost only 36% for the same period, which suggests that Ethereum decided to climb down on its own.

Why is Ethereum losing pace?

The blockchain platform co-founded by Vitalik Buterin is still the most widely used distributed ledger network which can host dApps, smart contracts, and other tokens. Nonetheless, Ethereum is going through significant pressure because the activities of initial coin offerings (ICOs) have dramatically slowed down. In mid-October 2018, a study carried out by Autonomous Research found that ICO activity has declined by 90% since the beginning of this year. What’s worrying is that the trend seems to point down for the coming months as well. Because of this, Ethereum is losing some demand, as the overwhelming majority of ICO projects are relying on it to create ERC20-based tokens.  

According to the research firm, less than $300 million were raised last September through ICOs, a long distance from January’s $2.4 billion.

ICO Funds

The ICO space is fading because it was bombarded by scams, which slowly drove away investors from utility tokens. Regulators are also keeping an eye on this form of crowdfunding, with some countries even banning this form of activity.

And it’s not only about ICOs — Ethereum is surrounded by bearish sentiment because of the uncertainty about its future plans. There have been very few updates in the fast-growing market, which is why things like congestions in the network might happen. This results in a disproportionate increase in the price of commissions for every transaction, which often delay and fail.

Ethereum miners are also moving away because there has been no visible growth in the hashrate in the past few months, which means lower rewards for them.

What should we expect next?

While there are several significant problems for Ethereum, it still might regain its dominance if relevant updates are made and the project is redirected to the right path.

It’s true that ICOs are slowly fading, but there is another emerging market that promises to become a megatrend: the security token space. Unlike ICO-based utility tokens, security tokens are regarded as much safer because they’re backed by real-world assets, such as real estate, company stock or commodities, among others. Token holders can have ownership rights, dividends, and voting rights, while the tokens themselves can easily incorporate compliance. Thus, more and more small companies are choosing to hold a security token offering (STO) rather an initial public offering (IPO). Also, due to the fact that ICOs are often associated with scams, many entities are turning to STOs. This makes Ethereum a winner again, as it can host security tokens with the same success.

The hope was also brought by Vitalik Buterin, who said during a recent conference in Prague that there was an enterprise version of Ethereum that is entirely based on a Proof of Stake (PoS) algorithm. This Ethereum 2.0 version, which he calls Serenity, will address the scalability issues and will be adopted by major banks, corporations, and companies around the globe.

On Nov. 6, former Google CEO Eric Schmidt said during a podcast with economist Tyler Cowen that Ethereum was a great invention, supporting the project’s positive image.

“I think the most interesting stuff that’s going on are the beginning of execution on top of blockchain, the most obvious example being the capability of Ethereum: If Ethereum can manage to figure out a way to do global synchronization of that activity, that’s a pretty powerful platform. That’s a really new invention,” he said.

While this might be a difficult period for Ethereum, the network might regain its dominant status in the medium-term future.

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About the author

Anatol is a passionate crypto writer that previously covered Forex topics for years. He realized the potential of blockchain technology at an early stage and redirected his focus right away

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Company That Offers Free Bitcoin for Purchases on Alibaba Graces CNBC’s Top Startups List

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    Bitcoin startup has secured a stop among the 100 best startups with less than $50 mln in funding

Company That Offers Free Bitcoin for Purchases on Alibaba Graces CNBC’s Top Startups List
Cover image via u.today

Lolli, the cryptocurrency firm that allows online shoppers to get Bitcoin rewards, has made to this year's "Upstart 100" list published by leading financial media CNBC. 

In its celebratory blog post, Lolli states that it is the only Bitcoin-related company that made it to the list that features 100 venture-backed startups from various industries such as artificial intelligence (AI), cybersecurity, healthcare, and e-commerce.  

"So excited and proud of what Alex and I and our amazing team have built in such a short amount of time. Making the CNBC Upstart list is high praise and great for both us and bitcoin. Many thanks to CNBC and our Lolli community!" says Lolli CEO Alex Adelman.    

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These companies have been picked up based on numerous metrics that include scalability, sales growth, access to capital, etc. CNBC had to choose the most promising startups among 600 companies that raised less than $50 mln in funding, which means that they are yet to produce significant impact on their respective industries. 

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Speaking of impact, Lolli has recently grabbed headlines by securing a partnership with Alibaba on Singles Days, a popular shopping holiday in China that brought the retail giant $38 bln in sales this year. From now on, Chinese-Americans can purchase goods on the site and get free Bitcoin instead of mundane cash-backs.  

As reported by U.Today, London-based digital payment company Wirex recently launched a multicurrency travel card that also lets its users earn rewards in Bitcoin on all in-store purchases.     

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About the author

Alex Dovbnya (aka AlexMorris) is a cryptocurrency expert, trader and journalist with an extensive experience of covering everything related to the burgeoning industry — from price analysis to Blockchain disruption. Alex authored more than 1,000 stories for U.Today, CryptoComes and other fintech media outlets. He’s particularly interested in regulatory trends around the globe that are shaping the future of digital assets.

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