Ethereum, the second-biggest cryptocurrency on the market, continues to struggle. It saw a whopping 20% drop in value over the last day alone.
Despite the meteoric rise of this and other digital currencies throughout 2017, Ethereum is now at its lowest level in a year.
The downslide echoes the sentiment in a number of emerging economies, which are all finding the value of their currencies plummeting as investors scramble for cover in the wake of worldwide trade uncertainty.
With the US-China trade war ramping up, the knock-on effect of implemented tariffs has seen currencies in markets such as Brazil, South Africa, Indonesia and Australia suffer.
The US dollar has emerged strong as investors seek safe havens and shy away from riskier economies. The same jitters, meanwhile, have spread to the cryptocurrency market.
Bitcoin, the marker for digital currencies worldwide and somewhat of a poster child for the move into decentralized markets, has also seen a huge drop, as it lost $1,000 of its value in one day.
Ethereum is now trading under $230, the lowest figure that it has seen since August 2017. Given that it was flying relatively high at over $600 in June, its decline shows just how quickly the markets can move and how fragile a decentralized currency can be.
With no government making moves to shore up Ethereum, its value is entirely at the mercy of the intentions of investors. Although this poses several uses, it has not helped the cryptocurrency fend off serious losses in the last couple of months.
The blockchain aspect of Ethereum is also becoming increasingly relevant, as it is the first choice of platform for all new Initial Coin Offerings (ICOs). This has led to a wide expansion in the number of new digital currencies available. For example, Block.one launched a blockchain cryptocurrency in Hong Kong.
Block.one’s EOSIO platform can match the capabilities of Ethereum but is more able to scale itself upward.
Having already poached Rob Jesudason from his role as Commonwealth Bank of Australia’s (CBA) finance chief earlier in the year, Block.one was able to raise $4bn from one ICO in 2018. Interestingly it issued EOS tokens to facilitate this, and the company raised capital through Ether tokens.
EOS has now taken its place as the fifth-highest currency on the crypto market. However, it has also been unable to weather the storm that has seen digital currencies raided as people look to free up capital and add to their liquidity.
The fact that Ethereum intrinsically links to blockchain programs around the world is likely to ensure its survival over the long term, as many in the fintech sector realize its potential to not only hold value but also act as a new form of transaction.
CBA has made use of blockchain in recent months and has been using the Ethereum blockchain to make its bond viable. Issued through CBA, the bond enabled $110m of additional capital to fund the work of the World Bank reconstruction and development division.
As the average cryptocurrencies struggle, with the majority posting an average 20% decline over the past day or so, their best chance of carving out a future is to find additional mechanisms beyond investing to prove their worth.