What Is Wrong With Ether?

None of us needs to be reminded of that the crypto market has been hit by an avalanche with prices declining more than 50% for the biggest asset caps and much more for the top ICOs of last year.

Crypto investors are reacting to the pain with classic behavior.  They are hiding their heads in the sand. Coinbase reports website visits are down 50% and other sites have fallen even more. This is what trend followers do when the market is going strongly against them. It won’t last but in the meantime, things are nasty.

What has been happening lately defies fundamental forces. Sure some of the news continues to be dark.  But while this is going on, lots of good things are happening as well.

And Now For Some Good Headlines

Here is a quick summary of some recent downright cheerful tidings.

Following, the G20 meeting on March 22nd, these gentle people concluded that cryptocurrencies do not warrant the regulation threatened by certain member countries.

The French Finance Minister Bruno LeMaire was practically giddy even before the summit in Argentina saying he wants his country to be out front in cryptocurrencies. Then on March 21st, Twitter and Square CEO, Jack Dorsey stated that “bitcoin will become the world’s single currency in 10 years or fewer”.  On March 22nd, the head of the People’s Bank of China (PBoC) practically endorsed crypto stating that “Bitcoin provides freedom”.

Why Is Everybody Picking On Ether

Just a few months ago this news above would have sent the prices of crypto soaring accompanied with flash headlines from Bloomberg to CNBC and beyond. Experts and talking heads would have been on air predicting Bitcoins future in big prices and glowing terms.  Today there is none of this.

But as puzzling as this can be, what is mystifying is the spread in the performance of the major players.  All cryptos fell last week with Bitcoin fairing the best off about 5%. Others like Bitcoin Cash, Litecoin and Ripple each were down around 7%+.  

On the other hand, Ether was the biggest loser falling 12%.  In a week where nearly everybody took their licks, the difference between Ether’s performance and others may not seem like a big deal.  Statistically it is huge. The difference is over 50%.

Everybody is entitled to a bad day or two once every so often.  On the surface what is disturbing is the technical chatter. Here is what Hacked.com’s own Mate Cser had to say in his posting today:

“Ethereum continues to be the main concern for bulls here, as the second largest coin is still stuck in a steep short-term downtrend, violating the $500 support level today. Below that level, the currency is on a short-term sell signal, while the long-term setup is still oversold, and investors could still add to their holdings. Support is now found at $450 and $400, while resistance above $500 is ahead near $575.”

Earth Shaking News From Nivaura

All those investors stuck with their heads in the sand missed a news article carried by CCN late last Friday.  To me this holds huge benefits for Ethereum. Here is a summary.

UK based Nivaura, in partnership with Microsoft and using Ethereum’s network

performed the registration, clearing and settlement functions on a pair of principal protected notes (PPN) tracking the FTSE 100 index, one of which relied on the Ethereum network and the other that relied on traditional methods, then compared results. The experiment was successful.

The key here is dramatic cost savings at the same comparative speed.  Here is the example offered. Under the traditional method, the administrative costs were listed at 30,000 GBP.  Under the Nivaura/Microsoft/Ethereum network, the costs were 50 GBP. That is a 99% reduction.

This has proved in a test case that the public ledger can be used to support regulated assets.

The blockchain is an increasingly attractive option as the payments industry continues to embrace cryptocurrencies and even digital fiat money.

When the platform catches it represents a paradigm shift in how investment products are designed, leaving third-party service providers and their hefty fees out in the cold.  Skeptics will be quick to ask, what if the platform fails to catch on. With a 99% cost reduction, there is little risk of this happening.

Every corner of the financial world is a target and this extends to investment managers with multi trillion dollars portfolios.  It may not happen overnight but one thing is guaranteed. Anytime you can reduce costs of anything by 99% you will quickly get the ear of Wall Street.

Raise Up From The Sand

In the title, the question was raised, what is wrong with Ether.  I am afraid to have done a terrible job in finding the answer. What may be have been a better question, what is wrong with Ethereum.  The answer here is much easier: nothing.

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.