In this article I look at two possible scenarios for Ethereum going forward. One positive and the other negative. This is not financial advice, but rather my personal opinion.

The bear market of 2018 has seen a dramatic downturn in all crypto investments. Some see it as the demise of crypto in general whilst others view it as crypto becoming more stable and finding its true value and there’s the view that cryptocurrency will rise again and Bitcoin (and the others) will reach new all time highs in the near future.

Manipulation, FUD (fear uncertainty and doubt), Mt Gox, fake news and the emergence of avenues like Bitmex that allow for investors who don’t even own crypto to short the market, have all driven down the price, particularly that of Bitcoin. Being the dominant currency, all others tend to follow Bitcoin price trends.

Time and time again we have seen green shoots and new hope is born, only to be followed soon after by red candles as we remain in a long term bearish/downward trend.

One of the biggest casualties over recent months is Ethereum. However, there appears to be other factors involved in it’s demise, not just the bear market.

In January of this year, Ethereum reached a price of $1,425 and currently (at time of writing) it is now worth a mere $225. ICOs (Initial Coin Offerings) are thought to have panicked over recent months and sold vast quantities of Ethereum driving the price down even further.

### A little background….due to Ethereum’s ability to create and manage smart-contracts as well as being a cryptocurrency, it has been the cryptocurrency of choice for most ICOs. The projects use ETH as a store of value which allows investors to purchase an equivalent amount of ERC-20 (Ethereum blockchain tokens). In most cases these ERC-20 tokens get converted into the native currency of the project. ERC-20 tokens can be seen as a stop-gap until such time as the project go live on their mainnet (their own blockchain). Once their mainnet goes live, a token swap is performed where all ERC-20 tokens are replaced with the equivalent value of their native token. ###

Many ICOs that started gathering investment earlier in the year accumulated a vast amount of Ethereum and held onto it whilst building their projects. This was their main source of income to fund their project expenses, pay staff and build their platforms.

As the bear market continued we saw Ethereum’s price drop to almost half between August and September. It appeared that panic selling by ICOs was the cause; trying to take value from the invested funds before the price of Ethereum hit a rock bottom.

At the same time, most ICOs decided to hold off listing on exchanges due to the risk of their price dumping in the bear market. Whilst this caused much disappointment with some investors, it was most likely a sensible decision.

Sound Investment?

Fast forward to today…we are now in quarter 4 of 2018. Q4 has traditionally been the most prosperous period in the calender for cryptocurrency.

Ethereum is building technology to improve its scalability such as sharding, casper and plasma which will dramatically improve its performance and appeal.

Regardless of any future plans for Ethereum, ICOs are now starting to list on exchanges, or at least announce dates when they plan to list.

Considering that the price of Ethereum was much greater when investors bought into their chosen projects, it is unlikely that they will sell into any other cryptocurrency other than Ethereum itself. Therefore, it is likely that when ICOs get listed on exchanges, investors will sell back into Ethereum. Doing this has its advantages. With the price of Ethereum being so low compared to the when originally invested, the amount of Ethereum gained could be much higher. Whilst this has no benefit on the dollar value, the increased number of Ethereum would favor those who hodl (hold) the token in the belief that ETH will rise again.

In this simple example we invested 1 ETH in the ExampleToken ICO when ETH was worth $1,425.

ExampleToken’s value was $0.10 per token so you purchased 14,250 ExampleTokens.

1,425 / 0.10 = 14,250

1 ETH is now worth $225 and you sell your 14,250 ExampleTokens for $0.12

14,250 x 0.12 = $1,710

With 1 ETH being worth $225, you now have 7.6 ETH

$1,710 / $225 = 7.6ETH

By default you have increased your Ethereum holding and if the Ethereum price increases in the future you stand to make a tidy profit.

So in summary:

We have entered into quarter 4 of 2018 (traditionally a more prosperous time of year)

ICOs are now starting to list

Investors will be looking to buy back into ETH as their losses could potentially be higher using any other currency

Those investors would be tempted to hold and not sell their ETH due to the price difference compared to when they invested — reduced sell orders means less price dumping and a higher probability of price increases

If the market picks up, we can expect more ICOs to emerge, many of which will use Ethereum

So there’s a chance that Ethereum ‘could’ be a good investment but only if it gains lost ground and the price increases dramatically in the long term.

Dead Duck?

Now for the counter argument…

Ethereum, although created primarily as a cryptocurrency has become more of an enabler for other projects, Dapps and ICOs due to its ability to use smart-contracts. If the ICO market does not pick up to level where it was before, or ICOs use alternative solutions such as NEO and other blockchains, Ethereum’s usefulness may diminish.

Other cryptocurrencies are approaching Ethereum’s market cap and in the last few days XRP has overtaken it for a short period. Perhaps we have found a new ‘norm’ for Ethereum’s price level and rather than being the second highest crypto in market cap, this recent change in order is just the start of Ethereum’s decline.

It appears that newer blockchains and projects have surpassed Ethereum in terms of technical ability and stability. The Ethereum team seems to have been sitting on their hands for way too long and allowed other technologies to overtake them.

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Only time will tell. No one really knows which way anything in crypto will go. We can only speculate.