After a spike in value near the end of the year, cryptocurrencies across the board saw a massive drop. The Ethereum price seemed to be bouncing back, but saw a decrease in value of more than 5% today, and the reasons are so far unclear.
It has been a rough couple of months for cryptocurrencies. In December, it appeared as if the Ethereum price showed no signs of slowing down, with these virtual investments across the board seeing highs that we had never seen before. This rise in Ethereum price brought in a lot of first-time investors who were, understandably, disappointed when the market proceeded to take a massive nosedive over the course of just a few weeks – bringing cryptocurrencies right back down to where they were a few months before. The Ethereum price had shown signs of starting to increase, but today we saw a drop in the value – reinforcing the idea that we can never be too sure of which how far and in which direction these cryptocurrencies will continue to move.
Ethereum price, like the majority of cryptocurrencies, is largely tied to speculation. While traditional investments like stocks have their value determined by a real-world entity such as the performance of a company, cryptocurrencies have no such basis. As such, it’s very easy for the Ethereum price to rise and crash due to volatility that is inherent due to the crypto design. While the price has been all over the place over the past few years, The Ethereum price has generally trended upwards – remaining at a massive increase since the same time last year despite the massive drop off we saw at the beginning of the year. Over the past few weeks, we’ve seen the price of most major cryptocurrencies start to recover, but this most recent drop reminds us that the current climate makes a market recovery anything but a sure thing.
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It’s important to keep in mind that a momentary dip such as the one we saw today is no indication of whether or not the currencies will eventually recover – and perhaps even surpass the value we saw at the end of 2017. With that said, the political climate regarding these investment opportunities is far different than it was even a few months ago, which may cause trouble for the virtual coins moving forward.
When cryptocurrencies like Bitcoin and Ethereum got their start, they were largely a niche investment favored by the techie crowd. However, the potential of these currencies as an easy-to-access opportunity for the average person to get started with investing caused them to grow in popularity quite quickly. With a market cap currently in the hundreds of billions, the Ethereum price and the price of other cryptocurrencies have made these investments an entity that is too big for the traditional investment industry to ignore, with many long-term investors and banks starting to recognize the potential of Ethereum, Bitcoin, and other major virtual coins.
While some cryptocurrencies are playing nice with the traditional financial community, such as Ripple and their collaboration with banks as a form of increasing liquidity and providing opportunities for money transfer, the majority of these investments stand in stark contrast to the heavily regulated market of more traditional stocks. Ripple is a bit of an outlier in that the direction of the currency is largely controlled by a parent company, and said company is working with banks to ingrain the cryptocurrency into the existing financial infrastructure, but competing coins aren’t taking that same path. The Ethereum price has been heavily influenced by both rumors and the potential for regulation that could stifle the continued growth in value, and as financial regulators seek to impose the same restrictions on cryptocurrency trading as we’ve seen with stocks, it’s possible that we won’t see the value continue to bounce back.
As mentioned above, the new regulations coming to light have had a marked effect on Bitcoin and Ethereum price, and this most recent dip in value may still be some residual damage from recent revelations in the cryptocurrency scene. China caused quite the upset a couple of months ago after a leaked document suggested that the country would soon pose harsher restrictions on cryptocurrency miners, which is a major problem for the numerous Ethereum mining operations that call Asia home due to the low costs of utilities. This news of new charges comes after the closing of one of the region’s biggest cryptocurrency exchanges, as well as the banning of initial coin offerings. Israel has also recently made the news due to their hesitation to embrace cryptocurrency, with the Ethereum price no doubt affected by the country’s suggestion that trading within the country be more heavily regulated.
If there’s one main takeaway from today’s dip in Ethereum price, it’s that investing in cryptocurrency is anything but a guarantee for quick and easy profits. Many made the mistake of putting everything into the cryptocurrency market with the price spike near the end of 2017, only to have their hopes dashed with the following crash. While we did see a reduction today, it’s difficult to attribute it to any one thing outside of the inherent volatility of the cryptocurrency market. It’s certainly possible that the Ethereum price will continue to rise despite this recent downturn, but there’s also a chance that these new regulations and restrictions may send the market into a downward spiral from which it will be difficult to recover. At the end of the day, we’ll have to wait and see whether this Ethereum price drop is permanent or just a small blip on its return to market dominance.