DESPITE showing signs of recovery last week, digital currency Ethereum is slumping again with a value of £642.96 ($895.44).

Overall, however, Ethereum has seen a dramatic turnaround since February 5, when its value slumped to just $578.43. Even still, this is way off its January 14 peak of $1,370.18. Here's everything you need to know about what's going on.

2 The value of Bitcoin is been incredible volatile in 2018 Credit: Getty - Contributor

What are CryptoKitties?

CryptoKitties, dubbed the next big cryptocurrency, is a new application built on the Ethereum chain.

It was launched on Thanksgiving and became available for transactions in December.

Players can buy and sell virtual cats for as much as $10,000, in a bid make hundreds of thousands more in real value.

Users purchase their collectable kitties with Ethereum, and then breed them to create more kitties.

2 Virtual kittens available for purchase on Ethereum's blockchain Credit: cryptokitties

Each cat has its own set of genes, uniquely coded as "Cattributes". Users will make more money if their cat's genes are appealing to other players.

The players can make two of their own kitties breed a third, or they can pay another user to mate with theirs - if they're looking for particular characteristics.

But the kittens have a cool down period, restricting how fast they can make new ones, in a bid to limit inflation.

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Is the cryptocurrency as valuable as Bitcoin?

Bitcoin has been struggling massively in 2018 and seen its value drop by up to half in what has been called the "biggest bubble in history".

It's yet to be seen if Bitcoin will recover.

Ethereum's value was volatile over January 2018 but it didn't see the dramatic drop that has plagued Bitcoin.

CryptoKitties became hugely popular after its launch.

Currently, it makes up around 4 percent of all Ethereum transactions worldwide, it has already made $1.3million in sales.

Peter Atwater, who studies market sentiment and heads Financial Insyghts, said he believed CryptoKitties could prosper.

He said: "The popularity of virtual cats fits the euphoria we see elsewhere in the crypto-currency space. It feels very reminiscent of the Candy Crush craze that helped propel the King Entertainment IPO back at the peak of the 'Unicorn' era in mid-2014."

CyrptoKitties developers believe it will thrive because unlike Bitcoin, players will still have the value of their kitties secured on the Ethereum blockchain, even if the game and its creators disappear.

But there are risks with this cryptocurrency, as there is with any other. Each time traffic to the network rises, CryptoKitties experiences a transaction backlog, so kitty fans are forced to wait for their new pets to be issued - which could affect how much money they earn.

Since the cryptocurrency is still in its infancy, its value is extremely volatile. Experts urge users to only invest money that they can afford to lose.

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