Yesterday, gave an optimistic forecast for Tesla, but reiterate my negative forecast for Ethereum (ETH), which as of 5/4/2019 is still the second biggest cryptocurrency with a market cap of around $17.5 billion, followed by Ripple (XRP).
The ETH/BTC ratio now at .028, which is close to new lows. 6 months ago, I said to go long BTC and other coins and ‘short’ ETH, which so far has paid off well . Disclosure: Short ETH; long BTC, XRP, XMR, LTC, XLM.
ETH is dying. Given all the past delays and high cash burn rate, it’s almost a certainty the Ethereum Foundation will run out of money or split before the Ethereum 2.0 road map is ever complete. Of course, I have no way of knowing this, but given that the currency NEM faced a major budget crunch in 2018 and threatened layoffs and restructuring, it’s not inconceivable that the Ethereum may suffer a similar fate. The Ethereum Foundation has an address that contains ETH for funding operations, and as the price of ETH keeps falling, presumably so does their reserves. Although they have not tapped into this reserve, it’s possible that they borrowed against it .
The Ethereum Foundation refuses to disclose financials even though the community demands transparency. My guess is, they have much less money than many expect.
What do you think will happen when they announce they need to raise more cash? Hint: it won’t be good. You think anyone will invest in a project that is burning cash, has no good prospects, cannot meet any objectives, and cannot disclose financials? Fuck no.
Or, regarding decentralized-apps, ETH will be taken over by other stuff, because ETH is slower than competitors such as TRX and EOS.
The ICO market will never return because there are no more potential scam victims left and the SEC is cracking down. ICOs will continue to dump their ETH holding, and such selling will keep the ETH/BTC ratio low and put a lid on any upside even if BTC gets back to $20,000.
So you have many major problems: ETH being too big relative to it’s fundamentals (which are quite poor), ICO market dead, ICO dumping, insiders dumping, loss of market share to competing coins, and ETH foundation lack of transparency and possible insolvency.
Many of the proponents of ETH are ignorant about basic economics. They argue that Ethereum should be valuable because of adoption and people using the Ethereum platform, but fail to realize that the value of a technology or platform to investors is NOT in adoption but in intellectual property and collecting fees. This why ETH has done so badly for investors despite so many many applications being built on the ETH platform. Saying that thousands of apps being built on ETH justifies it being worth $1,000/coin is as fallacious as saying that thousands of websites being made with HTML justifies HTML being worth billions. The reason why Apple and Microsoft have made investors billions is because of intellectual property and developers having to pay a fee to use those platforms.
It’s finance 101 that the value of a platform or network is how much wealth for investors can be generated on it, not how many users it has. Facebook’s network is worth billions of dollars because of the ad revenue it generates, which translates into higher shareholder equity. ETH’s high inflation rate fails in this regard, by diluting such equity. This is why coins with much less adoption and much smaller networks and platforms such as Litecoin, Monero, Ripple, Dash, and even Ethereum Classic have outperformed ETH.
ETH will not be totally worthless but maybe be worth $1-2 billion total when the dust settles. Or a final ETH/BTC ratio of .005 or less