{"id":75052,"date":"2017-06-12T20:08:43","date_gmt":"2017-06-13T00:08:43","guid":{"rendered":"https:\/\/stateofthenation2012.com\/?p=75052"},"modified":"2017-06-12T20:08:43","modified_gmt":"2017-06-13T00:08:43","slug":"heres-what-is-really-going-on-with-ethereum","status":"publish","type":"post","link":"https:\/\/stateofthenation2012.com\/?p=75052","title":{"rendered":"Here’s what is really going on with Ethereum"},"content":{"rendered":"
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I was wrong about\u00a0Ethereum<\/h1>\n

WhalePanda<\/p>\n

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I was wrong about Ethereum because it\u2019s such a good store of value\u2026 no wait, let me try again.
\nI was wrong about Ethereum because it\u2019s such a decentra\u2026 nope.
\nI was wrong about Ethereum because everyone is using it as a supercomputer\u2026 No.<\/p>\n

I do admit I didn\u2019t see this Ethereum bubble coming, but then again I wrongly assumed that no startup would need or even dare to ask $50 million in funding and I also wrongly assumed that people would use common sense and that leading developers would speak out against this sort of practice. Quite the opposite it seems.<\/p>\n

Ethereum\u2019s sole use case at the moment is ICOs and token creation.<\/p>\n

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What\u2019s driving the Ethereum\u00a0price?<\/h4>\n

Greed.
\nGreed from speculators, investors and developers.<\/p>\n

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Can you blame them?
\nSpeculators and investors: No.
\nDevelopers: Absolutely.<\/p>\n

So let\u2019s think for a minute and think what determines the price? Supply + demand. Pretty straightforward.<\/p>\n

Supply:<\/em><\/strong> the tokens that are available on the market, right? But with every ICO there are more tokens that are being \u201clocked up\u201d. Obviously the projects will liquidate some, to get fiat to pay for development of their project, but they also see the rising price of Ethereum. So at that point greed takes over and they think, totally understandable, \u201cWe should probably just cash out what we really need and keep the rest in ETH, that\u2019s only going up anyway it seems.\u201d
\nAnd obviously there are new coins being mined, but if you look at the amount of ETH these ICOs raise, at this point, it\u2019s just a drop in a bucket.<\/p>\n

Demand: <\/em><\/strong>You have the normal investors (who are already very late to the game at this point\u2026 as usual), but the buy pressure that these ICOs are creating is crazy and scary. Take TenX<\/a> for example, it\u2019s an upcoming ICO at the end of the month. The cap is 200,000 ETH (at current ETH price of $370) that\u2019s $74,000,000 for a startup. Here\u2019s the best part: it\u2019s only 51% of the tokens. Effectively giving it an instant $150 million valuation (if it sells out, which it probably will).
\nAnother example is Bancor, a friend of mine runs a trading group, he collected 1,100+ BTC to put into Bancor. This needs to be converted into ETH before the sale starts. These are decent size players, but not even the big whales who participate in these ICOs.<\/p>\n

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What will the price do\u00a0next?<\/h4>\n

It can go quite a bit higher, there are so many coins being taken off the market by these ICOs, that it can still continue for a while and everyone is seeing this and thinking: \u201cWhy aren\u2019t I doing an ICO\u201d. There are lots more coming.<\/p>\n

At one point it will crash, hard. What the trigger will be? Bug(s) in smart contracts, major hack, big ICO startup that fails\/fucks up, network split, even something as silly as not having a decent ICO for a couple of weeks which creates sell pressure from miners and ICO projects can cause a big crash. It\u2019s not a question of \u201cif\u201d, it\u2019s a question of \u201cwhen\u201d. That being said: Markets can remain irrational for quite a long time.<\/p>\n

Usually when a bubble like this pops we could easily see 70\u201380% loss of value (for reference: Bitcoin went from $1,200 to $170 after 2013\u20132014 bubble). This is however quite the unusual situation and I\u2019m not sure to what kind of bubble I can really compare it.<\/p>\n

I\u2019m sure most of you have seen \u201cWolf of Wall Street\u201d. Just re-watch this clip and see if you find any similarities with the current situation. (bonus clip<\/a>)<\/p>\n<\/div>\n

http:\/\/www.youtube.com\/watch?v=UTHlXb0PXh4<\/p>\n

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What I really find interesting is what the ICO startups will do, Bitcoin had hodlers and investors mainly, individuals who most of the time had a fulltime job and didn\u2019t need to sell. With Ethereum there is this huge amount being held by companies who need to pay bills. Will they panic dump to secure a \u201chealthy\u201d amount of fiat funding, will they try to hold through a bear cycle?<\/p>\n

Taking responsibility.<\/h4>\n

Everyone loves making money, you can\u2019t blame traders or investors from taking advantage of this hype. That would be silly. People will buy literally anything if they can make a quick buck out of it.<\/p>\n

The responsibility here is with the developers, Consensys and the Ethereum Foundation but they don\u2019t take responsibility since they\u2019re getting more money. This will end with the regulators stepping in.<\/p>\n

The reason why I say that it\u2019s with developers, Consensys and the Ethereum Foundation is simple:<\/p>\n