What's Putting Pressure on Ethereum's Price?

 Ether, one of the most sought after cryptocurrencies, has been under pressure lately. Ethereum experienced a phenomenal rally in its price on the back of massive corporate interest and immense functionality, touching a peak of $400 in June, which translates to a rise of 4,900% in six months. It’s currently trading at around $168 levels, down by 57% in a span of 35 days. The decline in its price has resulted in a decline in its market capitalization and its market share.

 

Ethereum, a decentralized software platform, is like the building block that can be used for multipurpose Distributed Applications (ĐApps) and SmartContracts that run without any third-party control in a secure and seamless manner. 

A major driver of its demand in recent times has been the launch of Initial Coin Offerings (ICOs) on the Ethereum platform. However, many of the projects launched are ICO platforms themselves and this makes them competition for the currency. In fact, it has been observed that the selloff of the received Ether (against tokens in an ICO) in bulk quantities for fiat by the ICO projects has been adding further pressure on its price. EOS received 651,902 ether (ETH), equivalent to $185 million, on July 1 and has been reportedly selling it for USD. Even Tezos, which raised $232 million, is believed to have converted Ether for fiat in a short span of time. While ICOs have been creating demand for Ether and Bitcoin, since tokens are issued against them, it exposes the flip side of the same system as well. Dumping of ETH, BTC or any cryptocurrency can disrupt the regular demand-supply equilibrium.The website ethereumprice highlights such a phenomenon. It says, “Someone may wish to purchase Ether to participate in an ICO, but demand such as this is largely irrelevant as a significant proportion of Ether raised during an ICO will be sold off to pay for operating costs. The same applies to remittance markets, where the demand for Ether is quickly offset by its subsequent sale.”Ethereum’s decline has been in tandem with movement in the broader cryptocurrency market. Bitcoin is under stress ahead of important events regarding its block size. Investors' anxiety has spread across to other virtual currencies since Bitcoin and Ethereum are influential in the overall virtual currency space. While Microsoft launched Ethereum Blockchain as a service on Azure in November 2015, the formation of the Ethereum Enterprise Alliance (EEA) and subsequent addition of corporate members in 2017 provided Ethereum’s price a big boost. The current downtrend of weakness in its price is a temporary phase.