Ethereum Down 50% as Steam Comes Out of Rally

Digital currencies fell sharply on Tuesday, with the price of ether falling below $ 200 for the first time since May — a 50% drop from its record high set just a month ago.

Bitcoin prices were down as well, off as much as 3% early in the day. Among the top 20 digital currencies, virtually all of them were down, with some off around 15%. It’s just the latest illustration of the extreme volatility in this burgeoning world of digital cash.

Such “panic” selling was to be expected after the gains earlier this year, said Charles Hayter, the CEO of research site Crypto Compare. “A correction was in the cards as traders reallocate their positions and take something off the table.”

Ether prices fell as low as $ 195 earlier this morning, according to the news and research site Coindesk. That represents a 53% drop from the currency’s all-time high of $ 415 set on June 12. Its closing price that day was $ 395. Bitcoin is down about 20% from its June peak.

The price of bitcoin more than doubled from January to June, rising as high as $ 3,018, and the price of ether rose 5,000%, surging from $ 8 at the beginning of 2017. Those gains were mainly driven by two main trends this year: a surge of interest in Japan and South Korea, and the rise of the so-called initial coin offering.

Those trends pushed the overall market value of all cryptocurrencies – there are more than 700 of them tracked by the website Crypto Market Cap – to more than $ 100 billion. The recent selloff has taken that down closer to $ 84 billion, of which bitcoin alone was $ 40 billion, according to the site.

It’s clearly a bit of panic,” said Vinny Lingham, the CEO of bitcoin startup Civic, “it was definitely overbought.”

As of this morning, bitcoin’s share of the total market value was 47% – down from nearly 90% in February, and ether’s was down to about 24%, down from a peak of about 31% in mid-June. At about that same time, bitcoin’s market share hit its nadir at 37% – with many observers predicting that ether’s value would soon surpass bitcoin’s. It was a development being called the “flippening.”

Instead the flippening has flipped on itself as ether’s price has been cut in half. The last month has seen some of the steam come out of this space, even as bitcoin and ethereum have been getting more attention in the mainstream.

Some of the ICOs that helped fuel this surge are seeing their prices drop sharply, as tracked by Crypto Market Cap. One of the most recent ICO offerings, a token called EOS offered by the startup, was down 17% on Tuesday, and more than 60% since it peaked at $ 5.40 – on July 3. The coin started trading on July 1.

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Another called Gnosis was down 14% on Tuesday, at $ 226. It traded as high as $ 389 on June 30. Once called Augur was down 15% at $ 18, after trading as high as $ 36 in early June.

“These markets move big when they move,” said Joseph Lubin, the CEO of ConsenSys, a Brooklyn-based shop that helps develop Ethereum-based startups.

Digital currencies are still in a relatively nascent stage. Bitcoin is only eight years old, ethereum is only two years old. For all the promise that underlies these currencies and the technology behind them, they are still essentially live experiments. The next test in that experiment comes later this month: a proposed upgrade to bitcoin’s underlying code that would expand the network’s transaction capacity, but has bitterly divided the coders, miners, and entrepreneurs in the space.

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