Ethereum Drops Massively – What you should do

HomeEthereum

Ethereum Drops Massively – What you should do

When Will The Metaverse Be Available?
Luna – What Happened To The Luna Crypto Coin?
DeFi 2.0 – Why You Should Be Excited

A number of recent downturns have shocked the cryptocurrency market, the most recent being the sharp Ethereum drop in price. According to coinmarketcap, the price has decreased from an all-time high (ATH) of $4,891.70 on Nov. 15, 2021, to a low of around $1,110, signifying a 76.96 percent reduction in six months and the lowest point since 2020.

This, however, is not the first time that the value of Ethereum, or any other cryptocurrency for that matter, has plummeted dramatically.

Since its inception in July 2015, Ethereum has experienced at least two significant price drops. On March 12th, 2020, Ether – the token used for Ethereum network transactions – fell by a historic 33% in a 24-hour period, making the crash one of the network’s largest in percentage terms in its first five years.

In absolute terms, however, the drop in ether (Ethereum) price was even worse, with a 94 percent drop during the 2018 bear market.

In both cases, there were concerning factors driving the downturn, and in both cases, things quickly recovered. But why is the price of Ethereum currently falling? What can you do if you have Ethereum investments?

Why Did Ethereum Drop?

A number of causes are likely to have contributed to the recent Ethereum drop in the price. Here, we’ll look at a few of them.

Several tests have been undertaken as part of the network’s anticipated transition from a proof-of-work to a proof-of-stake architecture. The most recent been the Ropsten test called the merge.

Ethereum-merge-2022

Ethereum-merge-2022

Ropsten is one of several testnets launched by the Ethereum Foundation in 2017 to improve the network’s performance.

Ethereum completed a successful test merge on the Ropsten network last week, on June 8, 2022, which is seen to be a key milestone in the network’s software update. This upgrade is set to take place between August and October this year.

The Merge, as it is generally known among investors and developers, will combine the proof-of-work (PoW) network with a new proof-of-stake (PoS) consensus layer testnet, with the genesis date set for May 30.

The goal is to simulate what will happen when Ethereum and the Beacon Chain merge and the network fully transitions to a PoS network.

From transaction processing to network efficiency, the upgrade is expected to address critical flaws and thus increase wider adoption and sustainability.

While developers were initially excited about the success of the various tests leading up to the merge, investors are concerned about the outcome.

Fueling this concern is the amount of ether (ETH) staked on the Beacon Chain. There are fears that once the merge is complete, the staked coins that have been locked away for some time will saturate the market, causing a higher price deep.

Despite assurances that assets on the Beacon chain will be released in stages over several months following the merge’s launch, many investors are selling in droves in order to profit while they can thus resulting in a sharp drop of Ethereum value.

Inflation Report and Fears of Recession

The economy is plunging into recession, which is a second and far more concerning reason why the Ethereum drop is deepening.

On May 15, 2022, the Federal Reserve, as it ramps up the fight against inflation, raised interest that was the highest in three decades. This was in response to the release of the Consumer Price Index (CPI) report.

According to the report, the consumer price index increased 8.6% year over year in May, reaching its highest level since 1981. Economists predicted an increase of 8.3 percent. The core index likewise increased by 6%, somewhat more than the projected 5.9% increase.

Those figures drove investors into a tailspin. They are already concerned about a probable economic slump, and now they are concerned that the Federal Reserve may see inflation as rooted in the economy and raise interest rates much more.

With key inflation reports hitting a 40-year high, missing much-desired estimates, and pushing the prices of everyday items through the roof, the stock markets reacted negatively to the report and fell sharply. The crypto markets did as well and pushed Ethereum to drop steeply.

When central bankers make such a strong effort to slow the economy, it frequently goes into reverse. Investors are racing to gamble on such a negative outcome, causing equities and bonds to plummet.

Americans are withdrawing assets from speculative investments and cryptocurrency portfolios, including Ether, as their retirement funds diminish and their groceries and electricity costs rise.

Celsius freezing of transfers

Celsius is a cryptocurrency lending platform that allows users to lend out their tokens (Cel) in exchange for high fixed returns on their deposits. As of the time of writing, Celsius has roughly $8 billion in loans to its customers.

freezing-of-celsius-withdrawal

freezing-of-celsius-withdrawal

All withdrawals, swaps, and transfers between accounts were halted on Monday. The step was made to assist the broader community by stabilizing liquidity and operations while maintaining and protecting assets, according to the statement.

This decision sparked investors’ worry regarding Celsius’s liquidity, prompting them to quit the platform. This is coming after the collapse of Terra’s Luna token last month, which also had a critical impact on the crypto industry. The halting of transactions has also intensified a cryptocurrency sell-off and caused Ethereum to drop sharply.

Read More: Luna – What Happened To The Luna Crypto Coin?

Regulatory Interest

The growing scrutiny of cryptocurrencies by regulatory authorities has been detrimental to the network. In recent months, regulatory organizations have expanded their monitoring of cryptocurrencies, as well as a high number of fraud cases involving ostensibly trustworthy and well-established crypto companies.

According to Bloomberg, the European Union is close to reaching an agreement on the Market in Crypto Assets (MiCA) proposal, which aims to establish union-wide laws for the crypto business.

There is also rising doubt regarding the future of cryptocurrencies, especially Bitcoin, as the US Federal Reserve releases its new monetary policy, which is about cryptocurrency market control. The same agency imposes tighter monetary rules on key stock exchanges, forcing the bitcoin market and stock exchanges to plummet.

This is sending shivers down investors’ minds and driving the Ethereum price drop.

Bitcoin Price Drop

Other cryptocurrencies, including ETH, have seen their value fall as a result of the current Bitcoin price decline. Bitcoin reached a New All-Time High of US$ 67,566 on November 8, 2021, setting a new milestone. The Bitcoin price, on the other hand, dropped to just above US$ 20,000 on June 16, 2022.

BTCUSDT_2022-06-17_12-58-19

BTCUSDT_2022-06-17_12-58-19

People will be obliged to sell their Bitcoins to pay their bills and living expenses, thus being left with less money to spend on Bitcoins and other hazardous assets, including, of course, Ethereum, according to a well-known economic expert bullish on gold.

In reality, the general sentiment toward cryptocurrency has weakened this year. In the face of global inflation, investors appear to be shifting away from bitcoin and into less hazardous options. This contributes to the Ethereum price decline.

Will the Ethereum Drop Reverse?

While some speculate that the market has entered “crypto winter,” and others joke about a possible (more permanent) cool period known as the “crypto ice age,” others remain bullish about Ethereum and crypto in general.

Even if Ethereum dropped to around $1,000 on Wednesday, it still represents a lifetime return on investment (ROI) of more than 700,000 percent.

Unlike Bitcoin and Ripple, Ethereum is not a currency, but rather an open-source software platform for blockchain applications, with Ether being the token utilized within the Ethereum network. Ethereum facilitates Defi as a software network that lets developers construct and power new tools, apps, and NFTs — meaning that if Defi succeeds, so will Ethereum.

The blockchain-based software network has a wide range of uses and applications in the IT sector, particularly in gaming, music, entertainment, and decentralized finance (DeFi), making it one of the most popular and frequently utilized cryptos There is also a lot of excitement regarding Ethereum, notably it’s utility and connection to NFTs and the Metaverse.

You may also like: When Will The Metaverse Be Available?

Therefore despite how steep Ethereum drops, based on the historical price chart, there are valid reasons to believe it will reverse.

What Can You Do If Your Investments in Ethereum Drops?

There is no way to guarantee that the price of a cryptocurrency will rise, especially in this current market situation. And, while there are contrasting ‘expert’ viewpoints in support of the only two options given, to begin with — sell or hold, you are better off conducting your own research and reinforcing the reasons you purchased in the first place.

Consider this simple scenario outlined by a crypto enthusiast on Quora, Jacob Smith:

In which case does buying ether at x but selling at less than (< x) make sense to you?

  1. a) You are compelled to sell because you require funds and it is your only source of income.
  2. b) You believe that Ethereum will never recover
  3. c) You have a better investment in mind that will compensate for your loss

If (a) is correct, it is reasonable that you would want to stay alive before reaping the benefits of any investment.

If (b) is the motive for desiring to sell, past price data simply proves this to be inaccurate.

If however (c) is an option on your desk, you have complete freedom to investigate it. Keep in mind that your initial investment in Ethereum most likely came with so many promises just like the current one you are about to investigate.

Jacob Smith concluded, however: “If none of these scenarios painted above are true, don’t sell it.”

Another user by the name of Nakashi Satomoto said:

“ETH will never fail as it continues to play a critical, if not – a crucial role in the realm of blockchain and cryptocurrency. Sure. It may not seem attractive now due to the many issues it has coupled itself with. Also from a price point – not as attractive as a decorated Christmas tree. But make no mistake; what the market had massacred in months, can be corrected within just a day. You, my friend, want to be IN – ON THAT DAY.”

He added: “The Crypto Market has a very strange way of removing and filtering all the weak hands, killing out all the baloney tokens, overhyped ICOs, amateur scalpers, and gamblers. Likewise, it also finds ways to reward the patient, the persevered, and the endured. Be the latter. Not the former.”

His conclusion? “And for all the naysayers, I would quote the Illustrious Grand Master….”If you don’t believe it or don’t get it, I don’t have the time to try to convince you, sorry.” ~ Satoshi Nakamoto””

It is critical that you do not panic if you have already invested in Ethereum. Cryptocurrencies are prone to fluctuation, so don’t make any hasty judgments based on short-term price swings, which can be deceiving.

Conclusion

Anyone who has invested in Ethereum should stay up to date on the newest Ethereum news and price updates. It’s crucial to remember that cryptocurrencies may be quite volatile, so recall why you invested in the first place to ensure you completely understand what you’re getting into and the risks associated.

The recent Ethereum drop in price is nothing new for this famous cryptocurrency, which has dropped in value before. There are a number of reasons why the Ethereum price has dropped, but the important thing is that it has happened before and recovered. The future of Ethereum looks promising, and as long as you do your research and don’t panic, you should be able to maximize your returns.

 

COMMENTS

WORDPRESS: 0
DISQUS: 0