For those that have been examining the cryptocurrency markets over the last couple of weeks, you’ve probably noticed something a bit weird about Ethereum.
For the last several days, Ethereum has been depreciating in price at a greater rate than the rest of the market itself – see the picture below to get a gist of what’s going on:
Source: Coinmarketcap; March 18
This was during day two of bitcoin’s most recent rally. As you can see above, the rest of the market made appreciable gains while Ethereum stagnated and even posted negative returns during that day.
Ethereum was the only coin in the top 20-30 that had posted negative returns during that day. Since then, it has also been the most ‘sluggish’ in terms of returns during this minor market rally.
So What’s Going On?
A popular and common theory that has arisen in the cryptocurrency community is that the price of Ethereum has depreciated so much in comparison to the rest of the crypto market because of ICOs.
As most of us know, ICOs typically take Ethereum in exchange for their projects because a great deal of them tend to build their tokens on top of the Ethereum blockchain. While this is a positive thing because it shows the popularity and success of Ethereum, it also means that there are large hordes of currency being held by these developers.
So, the popular theory that has arisen in the community is that these developers are now ‘dumping’ their Ethereum as it depreciates in price in order to ensure that they can maintain enough liquidity to fund their projects.
While there are several logistical reasons for why this may not be the case, it is first important that we shell this theory out in its entirety before assessing its legitimacy.
Current ETH holdings of major ICOs. Data compiled by @nic__carter.