In Just two weeks, the price of Ethereum dropped by 44 Per cent. Could this have been spurred by ICO’s hedging in Fiat?
In 14 days, from August 1st to August 14th, we saw Ethereum plummet from $470 to $260, reaching its lowest point in 2018 by falling below the $300 mark for the first time since early November 2017.
The rest of the cryptocurrency market also saw a steep decline in valuation, losing close to $150 Billion off its Market capital in just one month. Interestingly, Ethereum performed well against the US Dollar amongst other cryptocurrencies such as Bitcoin and Bitcoin cash, however, it soon became one of the worst performing digital assets.
Ethereum, on the 14th August suffered a further decline dropping 18 per cent of its value against the US Dollar, declining from $300 to $260 within a 12-hour space. During the same amount of time, Bitcoin lost 6 per cent of its market cap.
While other cryptocurrencies did experience major drops in value, Bitcoin for instance, only lost 6 percent of its market cap against the US dollar.
Nouvive believes that the reason for such a drop is as a result of blockchain projects, in the form of ICO’s who raised hundreds of millions of dollars in Ethereum over one year, dumped as a result of the 44 per cent drop. Many could have started towards the later July in Over the Counter trades, these OTC trades are late to show up to the exchange prices, thus creating a domino effect across major exchanges.
The problem we have found is that when you give Ethereum to Ethereum competitors, they can unload on the spot market and short on the futures market, thus manipulating the market towards their intended price, but this also acts as a hedge.
It is important to acknowledge that the amount raised by ICOs in their token sales do not necessarily mean new capital coming into the market but rather existing capital stored in major cryptocurrencies like Bitcoin and Ether moving to ICOs.
It must be understood that the amount raised by ICO’s do not mean new capital is coming into the market, but rather existing capital is moving to ICO’s.
This week, Arthur Hayes, the CEO of cryptocurrency exchange BitMEX, revealed that in merely a week, BitMEX became the largest exchange for ETHUSD trading, as its 50x leveraged ETHUSD swap has evolved into the most liquid Ethereum trading pair in the global market.
Given the overly strong downtrend of Ether and the rest of the market, it is evident that the increase in the activity of ETHUSD trading pair hosted by BitMEX demonstrates a rise in the number of shorts placed by investors that have lost confidence in the short-term trend of Ether.
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