HomeAltcoin NewsWhy Ethereum’s Success as a Network is Bringing Down Price

Why Ethereum’s Success as a Network is Bringing Down Price


The second most popular cryptocurrency, Ethereum, has seen astounding growth in the past year or two with hundreds of projects being developed on the platform. Despite the use of the network, the price of Ether has fallen over 84.3% from its ATH.

Bear Market or End of the Party?

It’s no secret that cryptocurrencies have been performing poorly, price-wise, over the past seven or eight months. Ether has been one of the biggest losers in recent times, falling 20% in the past month and pushed down again thanks to comments from Ethereum co-founder Vitalik Buterin

Buterin recently told Bloomberg:

The (Ethereum) blockchain space is getting to the point where there’s a ceiling in sight.

The market reacted to these comments by dropping below $200, around 11%. However, Ethereum seems to be a victim of its own success.

Blockchain Scaling Woes

Ethereum was not immune to the blockchain bottleneck that affected several networks during December 2017. Ethereum’s fees rose sharply thanks to the congestion, hitting records of  $3.12 according to BitInfoCharts

Some of the more popular ICOs needed to set up precautions in case too many people tried to purchase tokens at once. If a huge influx of transactions came in from hundreds or even thousands of users only minutes after a token sale goes live, there was a very good chance that not everyone’s transaction will get confirmed in a timely manner.

Thousands of new users started using the network over the past year and a half mainly because of one huge factor; ICOs. Over two-thirds of all initial coin offerings are launched on the Ethereum network, almost all of which accept Ether for tokens.

LBN Stratis ICO Projects

This often-required payment method caused mass amounts of retail investors to purchase ether to participate in these token sales, increasing the value of the cryptocurrency 160 times over the course of a year. All of this money pouring into Ether now sat in the wallets of development teams launching a platform – development teams that need cash to cover salaries and overhead. This resulted in a massive sell-off of ETH, further suppressing the price.

Is Ethereum Supposed to go to the Moon?

This may not be what everyone wants to hear, but Ethereum could still be a very successful and used platform while the price of Ether remains relatively stable/low. At the network’s core, ether is used for one thing; to pay miners in the form of block reward and gas/transaction fees. Ethereum was not really meant to be a payment network such as Bitcoin or Bitcoin Cash. It was built as a worldwide decentralized computer that people can build on. The network would function the same regardless of the USD value of the ether token.

What do you think about ETH’s recent price drops? Are these an expected correction, or a sign of worse times to come? Let us know in the comments below!

Images courtesy of ShutterStock and Flickr

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