Home Crypto Trader Pro Ethereum Facing Economic Hurdles?

Ethereum Facing Economic Hurdles?

by Pragati Shrivastava
Crypto Trader News, bitcoin, blockchain, altcoin, cryptocurrency, marketing, distributed ICO, Ethereum

When Ethereum was first introduced to the world in 2015, it was priced at $2.77. It has been labelled an altcoin, however its recent developments have proven that it is much more than an altcoin. In fact, it wasn’t created with the purpose of transactions or as a payment network; it was created to support a decentralized ecosystem of apps, many of which have been quite popular like Bancor and BAT. Despite being number two on the list by market cap, Ethereum is facing some troubling economic hurdles.

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Ethereum has its development on point and is working its way towards an ambitious project, Ethereum 2.0. Despite Ethereum’s plans, there are several crypto experts who expect the cryptocurrency to hit rock bottom within the next two years. Ethereum is currently trading at $144.59.

In the historic bull of 2017, the currency was trading at $1,366.77. Despite this drastic fall in price, it continues to be the second largest cryptocurrency, after Bitcoin. It is followed by Ripple and USD Tether with a current market capitalization at $15 trillion and its circulating supply approximately 109 million. The Ethereum network recently went through a hardfork called the Instanbul Upgrade and the network is now stronger and more secure.

While it makes us hopeful when we discuss Ethereum’s progress, the important question is whether the foundation will have enough money to run until then or not. At this point it is almost certain that the Ethereum Foundation will run out of money or split before the Ethereum 2.0 road map is ever complete. Of course there is no way of knowing this for sure, but there have been instances in the past when a cryptocurrency project has run out of funds. Such a situation, if it arises, will threaten massive layoffs and restructuring. If Ethereum suffers a similar fate, Ethereum 2.0 may become a distant dream. The development and launch of the project may even be delayed indefinitely.

While we are discussing their funding and budgeting, it is worth a mention that the Ethereum Foundation has an address that contains ETH for funding operations, however, as the price of ETH keeps falling, so does the value of their reserves. Although they have not tapped into the reserves, it’s possible that they borrowed funds with this as the collateral.

It makes their activities mysterious, as they refuse to disclose financials even though the community demands transparency. This could be because their funds are diminishing and they wish to keep it a secret to avoid the community from going paranoid and selling off. However, this also means that they are unable to raise further funds. If they are to raise funds, they would have to disclose their financials. And even if they decided to do it, chances are, the price will fall further due to nervous investors. It may trigger a massive sell-off and result in a blood bath. The other major challenge here is that no investor really wants to invest in a project that’s already burning cash. Investors look for good prospects, projects that meet their objectives and good financials.

Ethereum does have some positive and unique qualities like it supports an entire ecosystem of decentralized apps. However when compared with other altcoins that have better scalability and faster transactions, Ethereum falls short. Its competitors like NEO (labelled Ethereum Killer/ Chinese Ethereum), Tron and EOS may take over.

Ethereum had a vast relevance in the ICO market, however since the beginning of 2019, ICOs have slowed down. They have been replaced with IEOs. ICOs were like a passing phase in the history of cryptocurrencies and may never return as they were shrouded with exit scams, regulatory clampdown and lost investor faith. ICO projects are now dumping their Ethereum holdings and recovering all they can to keep operations going. This selling is sure to further limit Ethereum’s potential for a big break. It may not see much improvement even after the launch of 2.0.

We have a list of challenges that may take Ethereum down to 0

  • Fundamentals (Scalability and Consensus Mechanism)
  • Fear of sell off/ dump
  • Loss of market share to competitors like NEO/ TRX and EOS
  • Complete lack of transparency and drying funds
  • Slow Transaction Speed

Most of these challenges have their solutions in the altcoin’s tokenomics. Despite poor fundamentals, this project has been popular and continues to enjoy a massive market share because of its adoption by several other projects in the ecosystem. It has turned out to be a valuable platform for launching cryptocurrency projects, raising funds and transacting for ICOs. It does not have intrinsic value in itself.

With a low demand for ICOs, it is already suffering. Its main sources of revenue are fees and selling/sharing its technology. Hence the high ROI. On some research, I found that Tron based DApps have more users than most apps on the Ethereum ecosystem. Ethereum’s value is justified because of DApps, but when the DApps are not so popular, so now… meh.

Even if Ethereum adoption gets triggered in the future, that does not guarantee that the price will go up and that’s because an increase in the number of users for a platform doesn’t translate to increase in revenue for the platform. An increase in the quantity of Ethereum held by users and decrease in circulation, would increase the relevance and the price of the cryptocurrency. However, that isn’t happening anytime soon and this may take Ethereum down the path to 0.

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