Crypto Analyst: Ethereum (ETH) Investment Thesis is “Questionable”




Although the crypto market, in general, has undoubtedly had a bad year, some digital assets have had it worse off than others. Bitcoin’s (BTC) ~83% decline from its all-time high is mere peanuts, especially when compared to the 94% loss that Ethereum (ETH) has undergone. ETH has fallen so far from its high horse that the market capitalization of XRP, Ripple’s go-to asset, has surpassed that of Ether. While many optimists believe that this discrepancy is a buying signal for Bitcoin’s former right-hand man, so to speak, a handful of analysts have declared that the asset’s harsh drawdown is justified.

ICO Season Dries Up, DApps Fail To Gain Traction

In early-2017, as Ethereum became a household name in the cryptosphere, investors began to manufacture an investment thesis surrounding ETH. Due to the abounding popularity of initial coin offerings (ICOs), and Ethereum’s ability to effortlessly facilitate such projects, ETH quickly became the de-facto king of token sales. And as such, as the ICO subset boomed, so did the value of Ether.

While ICOs became an industry flavor of the month, so did decentralized applications (dApps), with Ethereum, again, becoming a hotspot for this distinct application of blockchain technology.

Initially, as 2017 came to a close, everything seemed fine and dandy for the originally Canadian project, as investors continued to launch money at Ethereum-centric startups for the promise of ground-breaking platforms.

Yet, once 2018 rolled around, it near immediately became apparent that these startups’ promises weren’t worth their water. Newfangled dApps were underwhelming, with many criticizing such initiatives for missing key functionality and falling victim to glitches. ICOs realized their promises were baseless, before coming under fire from key regulatory agencies — namely the U.S. Securities and Exchange Commission.

Related Reading: In EtherDelta Case, SEC Hints Most Ethereum Based Tokens are Securities

In short, the bottom line is that Ethereum, including its ICO and dApp constituents, hasn’t lived up to the test of the dismal market conditions, making lower valuations for Ether sensical. In a recently-published 14-part Twitter thread diving deep into the current state of the Ethereum Network, Alex Kruger, a crypto-friendly markets analyst based in New York, echoed this sentiment.

Kruger, who has expressed cynicism towards altcoins historically, claimed that ICOs got caught up in the “fragrance of easy money,” and began touting outrageous ideas for tokens. Of course, little-to-zero of these ideas came to fruition, creating an environment where there wasn’t valid demand for ETH. As alluded to earlier, dApps didn’t pose much better of a value proposition, as made apparent by the lack of daily users on even the most enticing smart contracts, like CryptoKitties, Augur, or the countless number of decentralized exchanges. Kruger quipped:

“Natural sellers (ICOs, miners, treasuries) will always sell and put downward pressure on price. And for as long as ETH has no natural buyers (catalyzed by promising ICOs and usable dApps), it is a pyramid scheme, always in need of new incoming suckers to keep the price from crashing.”

The Bitcoin proponent, touching on the network value assessment model that is often applied to cryptocurrencies, noted that Ethereum’s fundamentals have gone to “s***,” making its bargain bin valuation rational. Coalescing his points into a single comment, Kruger noted that while Ethereum isn’t dead nor crap, its investment thesis centered around token sales and blockchain-based applications has become “questionable,” due to the trying times catalyzed by the advent of 2018’s bear market.

Kruger isn’t the first to chastise Ethereum. Arthur Hayes, CEO of BitMEX, issued a controversial blog post in August, claiming that ETH could go from “a 3-digit to a 2-digit s***coin.”

Ethereum 2.0 Still Promising

Although many lambast Ethereum for its progress (or lack thereof), the long-standing network still has the potential to reverse its dreary fate in the future. As reported by NewsBTC previously, the network’s Serenity (Ethereum 2.0) upgrade sequence is right around the corner. For those who aren’t in the loop, Ethereum co-founder Vitalik Buterin claimed that Serenity will facilitate “pure PoS consensus, faster times to synchronous confirmation (8-16 seconds), economic finality (10-20 minutes),” and, arguably most importantly, a 1,000x scalability upside.

While Serenity is unlikely to go 100% live during 2019, many are confident that in 2020 or 2021, immense progress will be made towards the project’s long-term goal, hopefully catalyzing some form of global adoption.

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