On June 21st 2017, the price of Ethereum on the exchange GDAX crashed briefly to 10 cents USD per ether due to a massive sell order.
This is a testament to the massive volatility of cryptocurrency prices. Much of the price is dependant on the public perception of the currency. Here are a few things that affected it.
Speculation about how the SEC would rule on the DAO Hack led to a drop in prices, since more SEC regulation would mean that it would be much harder to trade cryptocurrencies. On the other hand, the advent of cryptocurrency exchange-traded-funds like the Winklevoss Bitcoin ETF meant that the average person could invest in cryptocurrencies without having to worry about dealing with exchanges and storing the tokens.
Initial coin offerings, or ICOs, have also been a huge factor in the price of Ether. I will talk more about them later on, but know that in the third quarter of 2017 Q3’17, ICOs have raised $1.3B with 150 ICOs while seed/angel investing across all tech sectors has raised $1.4B across 1602 deals.
Venture capital funds have also started investing into Ethereum technology, either into the ICO like Blockchain Capital, or directly into the token like Polychain Capital. Given the exploding interest surrounding cryptocurrencies, FOMO, or “Fear of Missing Out” plays a role in many people’s investing decisions.
For better or for worse, people do not want to miss out on the “next bitcoin”, and end up investing in cryptocurrencies like Ether, driving the price in upin a positive feedback loop.
The fact that Bitcoin’s and other cryptocurrencies’ prices are starting to be broadcasted on public radio further contributes to this “FOMO.” And economic and political circumstances like Brexit, Trump’s election, or India’s war on cash can also contribute to driving up the price of cryptocurrencies, since they tend to undermine people’s trust in centralised systems and cause them to shift towards more decentralised systems like cryptocurrencies.
Due to some economic and political situations, and of course the aforementioned Fear of Missing Out, cryptocurrencies became extremely popular, resulting in a massive hype train. In December 2017, cryptocurrencies started attracting much more “mainstream” attention, and let to a change in the demographic of the people who were invest, in particular, an increase in the number of millenials getting involved.
A decentralised application built on top of Ethereum called CryptoKitties, an online marketplace for virtual cats, became so popular that at one point, it contributed to 10% of Ethereum’s total network transaction volume.
It’s important to have an educated understanding of the space
rather than make decisions based on volatility and prices. - nashsahibimajd
Although the price of Bitcoin is many, many times higher than what it was a year ago, it’s started to take a downward turn in the beginning of 2018 after peaking in December 2017.
An increase in the amount of international regulation especially in India, South Korea, US and the UK, combined with a “mob mentality” of people investing without truly believing in the technology led to quickly changing market caps, and eventually the hype traincrashed.
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