Ethereum along with bitcoin was one of the most highly valued cryptocurrencies last year, but this year it’s a different story. The ETH price has plummeted from a peak of nearly $1,400 in January 2018 to currently hovering at $185, its lowest level since July 2017.
It’s one of the steepest drops that ETH had since it was created three years ago. There were four similar trading scenarios that unfolded in the No. 2 cryptocurrency based on market cap, including falling from $2 to pennies in 2015, from $20 to $5 in 2016, from $420 to $150 last year followed by gains leading up to the current cycle.
Falling Mining Profits
Ethereum’s hashrate dropped from 300 trillion to 270 trillion hashes per second. This is one of the largest declines in the history of the project. It may be a result standard variance or something more severe, such as ETH mining getting close to being unprofitable.
Miners are rewarded with approximately 20,000 ETH per day. Due to substantial operating expenses to run their machines, however, most of them sell their earnings quickly. Thereby increasing supply and pushing the price lower.
Last month, Atlantic Crypto Co-Founder Brian Venturo reported that the cost of electricity alone to mine 1 ETH is $152. Considering the current ETH price of $173 is within approximately $20 of expenses, including rent, payroll and maintenance, it’s no wonder profits are squeezed. The current market dynamic suggests that some Ethereum miners are likely to either become bankrupt or be on the brink of bankruptcy, according to Trustnodes.
ICOs Fundraising Falls in August
Blockbuster fundraising from initial coin offerings (ICOs) last year was largely responsible for buoying the ETH price in 2017. ETH remains the main cryptocurrency by which ICO tokens are based, which increased its demand exponentially.
According to Autonomous Research data, however, startups only raised $326 million in August 2018, reflecting the lowest fundraising tally since May 2017, Bloomberg notes. By way of comparison, in January 2018, blockchain startups raised more than $3 billion via ICOs.
Ethereum Co-Founder Vitalik Buterin said earlier this month that the explosive growth of cryptocurrencies and the blockchain had probably come to an end and that from now on, the best approach would be to focus on their use in real applications.
“The blockchain market is getting to the point where there is a ceiling in sight and there is no more opportunity for 1000x growth in the industry,”
The ETH price is currently hovering at $173.29, down 9% on volume of $1.8 billion.