Ethereum Price Meltdown and What’s Causing It

Ethereum was the center of a vicious selloff recently, with prices falling as much as 14% over a 60-minute stretch. Hours later, the cryptocurrency had recovered from intraday lows but was among the worst performers in the top-100, as listed by CoinMarketCap.

ETH/USD Price Levels

Ether’s precipitous drop began around 23:49 UTC on Sunday, culminating in a new bottom at 1:59 UTC on Monday. According to CCN, prices bottomed at $492, a more than 14% drop.

At the time of writing, ether was valued just over $523, having declined nearly 9% from the previous session. ETH trade volumes were $2.4 billion, which accounts for roughly 14% of total market turnover.

Ethereum wasn’t the only cryptocurrency to decline heavily on Monday. Bitcoin cash plunged nearly 10% to $900 while Tron (TRX) declined nearly 13% to $0.061.

As for bitcoin, prices were down 3% at $7,147.

Who’s Dumping Ether?

Ethereum’s quick price collapse appears to have originated by Bitfinex, the world’s fourth largest digital currency exchange by overall trade volume. From there, a domino effect may have caused subsequent selloffs on other popular exchanges.

This makes sense given that roughly 12% of total ether transactions are processed via Bitfinex. Additionally, more than a third (36%) of the exchange’s business is generated via ether trades.

On that note, the real question is, who is dumping ether in the first place? Some analysts have speculated that ETH tokens are dumped by way of initial coin offerings (ICOs) and other blockchain projects.

According to one metric, more than 600 projects have launched Ethereum-compliant tokens – a universe that is collectively valued at $40 billion. Even a small handful of projects liquidating their tokens on a public cryptocurrency exchange could generate a similar response to the one we saw today.

The bulk of the blame is being levied at EOS, which apparently spent $1.4 million worth of ETH on Monday. That’s about $400,000 more than it doled out four days ago and well above the $850,000 spent over the span of the month. The dump occurred mere days before EOS plans to launch its mainnet.

EOS still has a combined 1.1 million ETH on the books, including roughly 215,000 on the crowdsale smart contract and another 90,000 in a multi-signature address labelled EOS-Owner.

Another bizarre tidbit involves an obscure project called NePay, which is dumping 80% of its total supply via airdrop. As one source put it, the company has been clogging up ether’s network for the past nine days. Some of the more astute Ethereum community members have called this project an elaborate DDoS attack because it requires users to “send” zero ETH to their wallet address for the airdrop to lock-in.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Author:
Chief Editor to Hacked.com and Contributor to CCN.com, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi