Ether, the native currency of ethereum, the most-used blockchain, has been in free fall since January despite being the crypto of NFTs.
“Should I buy Ethereum?”, asks crypto influencer Ben Armstrong, known in the crypto space as @Bitboy_Crypto, to his almost 800,000 followers. The second most popular cryptocurrency has been in freefall for several days in tune with bitcoin, but at a more frantic pace.
Ether ETH was off 3,45% to $3,080.48 at last check Monday, according to Coindesk, as the sector was battered by interest rate hike concerns and an internet shutdown in Kazakhstan
Hashtags #ethereumcrash and #ethereum dip are trending on Twitter where fans and skeptics of cryptocurrencies are exchanging barbs over its sharp decline.
Ether’s price dropped back below below $3,000 on Monday morning, before bouncing back a little bit. After topping $4,100 on Dec 27, the token has ranged between $3,000 and $4,000 in the days since. The last time ethereum dropped below $3,000 was in late September before a strong run that included a new all-time high in November
Why is ethereum declining ?
A combination of rising government bond yields, a firmer U.S. dollar and the shutdown of key bitcoin mining capacity in Kazakhstan last week have all combined to push crypto prices down.
Nevertheless, the second largest token by market value after bitcoin is facing a lot of challenges.
Its critics say it has expensive fees and slow transaction speeds as traffic crowds the network and have many blockchain developers looking at alternatives. “ETH-killers” have emerged with developers who use blockchain technology to build so-called decentralized finance, or DeFi applications.
These crypto networks want to take market share from ethereum but ethereum supporters think that competitors – polkadot, avalanche, cardano, solana- will still rely on ethereum as a base.
“There’s too many trade-offs other chains are making that ethereum is not making on the decentralization side that are pretty important” Joey Krug, co-chief investment officer at digital-asset investment firm Pantera Capital, told Bloomberg, noting security concerns. “I don’t know if they’re best suited to be the new global financial settlement”.
What now?
Ether rose almost 400% last year, rekindling speculation that it could surpass bitcoin one day. Even with the late slump, ether is still in good shape. Its price was just a little over $1,000 in January 2021, leading some to posit that things will get better soon.
Most NFTs, non-fungible tokens, a cultural phenomenon throughout 2021, are purchased with ether, which is easily converted to U.S. dollars on exchanges like Coinbase, Kraken and Gemini.
Ethereum is the most widely used platform for defi and other use cases. In October, when the total locked value in defi hit $245.5 billion, ethereum accounted for more than half at $150 billion, according to data collated by CryptoRank.
Unlike bitcoin, which functions mainly as a payment network and cryptocurrency, blockchain networks such as ethereum and solana let users build apps that can store personal data and set rules for complex financial transactions, like the smart contracts that govern NFT ownership and sales.
