Ethereum: Why Is It Underperforming

There are many things these days that are hard to understand.  Market psychology toward cryptocurrencies is not one of them: it stinks.  Somehow the gods of good news are being ignored while the forces mental madness are controlling the asylum.  These dudes are overwhelming everything else. For someone like myself that is supposed to be drawing conclusions from data and verifiable facts, admissions like this are very uncomfortable.

While I can reluctantly accept that when the mob is against cryptocurrencies, every coin and token gets affected. The big guys like bitcoin, the altcoins – it doesn’t matter.  Everybody is guilty by association. But that does not mean everybody should be punished equally.

Take the case of Ethereum for example. The price has, by any measure of data or fact, taken an unequal beating.  Over the past week, the price of Bitcoin has fallen 6.28% to around $6,280 at the time of this writing. Over the last 30 days the rate of decline almost 17%.

Ether on the other hand fared far worse falling a bit more than 10% in the week and 21% over the last month.  Now there are readers who are Bitcoin devotees and they might feel that we are making a big deal out of a short term period.  If you are a holder of EOS or Tron you are probably quick to point out how much worse you have fared during the same period.

Of course, you would be right considering the 40% type tumble these two have taken. But this is just the point.  The news for holders of EOS and Tron has hardly been favorable lately. But that is the whole point of this article. Both of these projects have their supporters calling them Ethereum killers.  But the news in the last week or so hasn’t built confidence for investors. That should have spelled happy moments for ether owners.

Stumbling On A Long Road

Let’s first take a quick look at Tron.  The project has been around for less than a year.  It ambitiously claims to be the future of the decentralize Internet.  Today’s market analysts make the point that the project still hasn’t exactly defined what they mean and how they plan to accomplish their goal. The following passage from a Coindesk article pretty much rips up Tron:

“The project is distinguished by the size of its funding ($70 million) and the outspokenness of its founder, former Ripple representative Justin Sun, who last week caused a stir in the tech world by purchasing the company behind file-sharing service BitTorrent.”  

Tron hopes to compete with Ethereum by launching its own protocol and abandoned Ethereum all together.  Reportedly, the project has been plagued by all sorts of accusations project leaders had plagiarized Tron’s white paper and improper use of Ethereum code. Worst yet, critics say that represents of Tron have failed to challenge the validity of these accusations.

And Then There Is EOS

EOS has given up close to 50% of its value in the last few weeks.  Last year, EOS was the third largest money raising ICO, bringing home $182 million, which suggests some very sophisticated investors got involved.  Currently, EOS is the fifth largest crypto at $7+ billion in asset value and the largest of the so called Gen III cryptos.

The value on EOS is tied to the fact they are well along in creating their own platform and launching the EOS mainnet. With much fanfare, the launch was scheduled for June 14. However, in practically no time after going live the EOS mainnet froze with no explanation of the causes. Even before the freeze there were reports of trouble.

This is not the end of EOS.  Rather a fact of life for any project as ambitious as creating an Ethereum killer from scratch.  We have always been impressed with EOS’ promised operating power of millions of transactions per second, compared with current ETH limits of about 15.  In addition there is that always promise of the absence of transaction fees.

However, the real issue with EOS is the amount of time required to get a true working platform in use and what Ethereum is doing to resolve their scaling limitations in the meantime. 

Ether should at least be one of the best relative performers in an otherwise awful crypto market.  You might rightfully point out how even the best relative performer in a down market still loses money for investors. That is entirely true.  But by displaying good relative performance shows there is some modicum of rational thinking in a crypto world that lately has had none. For ether owners, there will be better times both in absolute and relative terms.

Featured image courtesy of Shutterstock.

James Waggoner is a veteran Wall Street analyst and hedge fund manager who has spent the past few years researching the fintech possibilities of cryptocurrencies. He has a special passion for writing about the future of crypto.