Ethereum’s Correction Hits 90% as Market Cap Falls Below $16 Billion

The rout of Ethereum intensified Monday, as the cryptocurrency fell further behind XRP in the market cap rankings, extending a brutal year-long correction that has raised serious questions over the protocol’s future.

ETH/USD Update

Ether’s price bottomed at $152.14 on Monday, its lowest since May 2017. The developer’s cryptocurrency is currently trading hands at $157, down 12.3% compared with Sunday.

Aggregate pricing data courtesy of CoinMarketCap presently shows a price-per-coin of $155 for ether. That brings the total market capitalization to around $16 billion, up slightly from an earlier low of $15.8 billion.

Ethereum’s market cap is now $4 billion lower than XRP’s, the so-called banker’s cryptocurrency that has managed to hold up remarkably well relative to its peers. XRP is down 3.9% over the past seven days compared with a 26.3% loss for ether and a 19.6% reversal in bitcoin.

Ethereum’s Existential Crisis

From a price perspective, Ethereum is a shadow of its former self, having lost a staggering 90% from its peak in January. At the time, the smart-contract protocol was riding a relentless ICO boom as hundreds (and eventually thousands) of crypto startups bootstrapped the Ethereum protocol to launch their own token.

While Ethereum’s bearish reversal is not out of the ordinary, the network has faced intense scrutiny over scalability, economic abstraction and the loss of reservation demand in the wake of the ICO boom. The protracted bear market has compounded these negative forces by making Ethereum mining costlier than before.

As Susquehanna recently noted, the business of mining ether via graphic processing units (GPUs) is no loner profitable. For GPU makers themselves, this means a significant loss of revenue.

The crackdown on initial coin offerings is also intensifying with the U.S. Securities and Exchange Commission (SEC) shutting down dozens of projects over allegations of fraud. As of Sept. 30, the SEC’s Division of Enforcement said it was working on more than 225 investigations tied to ICOs.

These factors have not only dampened excitement over Constantinople – the so-called Ethereum 2.0 upgrade designed to address many of the issues plaguing the network – they have apparently undermined ether’s status as a reservation currency. Investors were once keen on acquiring ether tokens to participate in ICOs. But now, with ICO startups raising a meager $145 million in October (down from $1.7 billion in December), ether is no longer seen as a de facto reserve currency.

Nevertheless, there is reason to believe that ether could explode higher over the next three months as bargain hunters and positive fundamental developments create renewed interest in the currency. Ethereum’s development community has set two possible dates for the proposed implementation of Constantinople – Jan. 16, 2019 and Jan. 12. This reasonable timeline could serve as a rally point for market participants evaluating the protocol’s fundamentals.

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.

Chief Editor to and Contributor to, 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