There is no question that Ethereum is the second-biggest and second-most famous cryptocurrency in the world. It is fast becoming a household name. The greatest giants of all aren’t traders but ICOs which own millions of ether worth billions of dollars. There are fears that if these projects cash out, the market is likely to experience havoc or a crash as it has happened severally.
On Sunday, while the cryptocurrency market was undergoing an unexpected turmoil, Ethereum went from bad to worse going from $516 to $460 in two hours. Prior to this nosedive, Ethereum has been one of the most stable coins compared to other altcoins which have endured huge losses. The loss made Ethereum one of the worst performing coins among the top 100 on Monday shaving about 16% off its value. The huge nosedive was attributed to one of last year’s ICOs offloading a huge amount of its Ethereum reserves. If this is the case, it’s not the first time that this is happening and definitely, it won’t be the last one.
Comprehending the amount of Ethereum that has been invested in ICOs is much simple. About two thirds of the $5.7 billion realized through crowd sales in 2017 was in ether form. The projects have a right to occasionally cash out their holdings for fiat currency to meet their expenses which cannot be paid using crypto. When they do it, it’s mostly in large quantities and this leads to a sudden dump of Ethereum.
Cryptocurrency markets have less liquid compared to the traditional financial markets. If thousands of ether is sold in the open market through an exchange platform, prices instantly go down. Traders are ever alert to even the least of signs of market movement and the thought of an upcoming dump can cause havoc in the entire crypto market. Bitcoin News report that this was the case on Sunday after fears flooded the market that Mt Gox was about to dump BTC en masse leading to havocs in the market.
Prior to the massive Ethereum nosedive, EOS had moved about 50,000 ETH to Bitfinex address. While it’s hard to determine when an enterprise offloads the funds moved to an exchange’s address, the movement is an indication of sell intent. Traders closely monitor the contribution addresses of major ICOs and whenever a crowd sale transfers massive ETH to an exchange it’s quickly interpreted as a sell intent which quickly deflates the prices in the market.
Ethereum is the most preferred fundraising platform for many ICOs and it is expected that the cryptocurrency will remain concentrated in the hands of few projects which can offload to the market any time triggering havoc in the entire crypto market.