Earlier in June, the market cap of Ethereum moved closer to that of bitcoin’s. Analysts suggested the possibility of the occurrence of the“flippening”, a situation in which the market cap of Ethereum overtakes the market cap of bitcoin.
Some researchers including Boom head of global policy and communications Eli Dourado revealed various statistics and measures that could potentially point toward the possibility of the flippening.
At the time, the market cap of Ethereum was closing in on the $40 billion margin and the price of Ethereum’s native token Ether reached $396, moving closer to the $400 region. Yet, after a major cryptocurrency market correction which led to the decline of nearly all cryptocurrencies in the market, the market cap of Ethereum declined by around $15 billion, from $36 billion to $21 billion.
Ethereum has recovered since the correction that occurred on June 27, as the price of Ether recovered beyond the $300 region. At the time of reporting, the market cap of Ethereum is $28 billion, which is still significantly lower than where it was earlier this month.
Analysts and investors including prominent venture capitalist Fred Wilson and Charlie Shrem noted that the market cap of Ethereum declined due to the sell off of investors. Shrem, cryptocurrency pioneer and the COO of cryptocurrency wallet platform operator Jaxx, particularly emphasized that the market cap of Ethereum was on an upward trend due to the emergence of investors looking into ICOs as short-term investment schemes.
“ETH is rising because new users want to “get rich quick with ICO’s”. They don’t care about the ETH price, and they aren’t holding. All the supply gets locked by the ICO’s in the contract. They won’t sell because the price is rising. Demand grows, supply is reduced. Eventually there is a “price break” and all the ICO’s need to protect their raise so they dump for BTC/USD. At first, they use OTC market. But as more sellers offer OTC, the price on exchanges is faster/easier so they dump on exchanges,” wrote Shrem.
The Ethereum network is struggling with scaling despite a lack of actual users. There exists a small group of users that may utilize Ethereum as a store of value and as a digital currency. However, Ethereum was not developed as a store of value since the beginning and it prioritizes flexibility in order to provide an efficient ecosystem for decentralized applications and decentralized autonomous applications (DAOs).
In a recent blog post, Coinbase co-founder Fred Ehrsam revealed that the Ethereum network would have to improve by a rate of 100x to allow a decentralized application with 1 to 10 million users to function and operate. In other words, there still isn’t a decentralized application with an actual user base and the vast majority of ICOs that have raised hundreds of millions of dollars have raised capital with no viable project, program and working prototype.
“While it’s tricky to make accurate estimates when combining scaling improvements, it’s conceivable we could see a 100x improvement by the end of 2018, which would allow a 1–10m user app,” wrote Ehrsam.
In order for Ethereum to come close to “the flippening,” its ecosystem of decentralized applications will need to acquire actual user bases and justify their value to the public.
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