Here’s Why Ethereum (ETH) Isn’t Like Any Other Cryptocurrency

Ethereum (ETH) is one of the top two cryptocurrencies on the market right now but, just as with bitcoin, it’s position at the top of the pile has far from insulated from the wider market’s decline seen over the last eight weeks or so.

With regards to ETH specifically, the token currently trades for a little over $810 apiece, down from the $1389 reached on January 15, 2018. That’s a 41% decrease from highs and it gives Ethereum a market cap right now of just shy of $79 billion.

Take a look at the mainstream news coverage of the cryptocurrency space right now and you will see the general treatment of Ethereum and its token ETH mimics that of many of the other coins in the space.

ETH Daily Chart

What this sort of blanket coverage overlooks, however, is that ETH is materially different from pretty much every other talk on the market right now and at least every one that is currently functional against its predefined use case.

What do we mean by this?

Well, for anybody not familiar with Ethereum, it’s a platform technology designed to serve as a protocol layer on which third parties can build decentralized applications (which are now being referred to as DApps for the main part).

As far as the actual token is concerned, ETH is used in a variety of ways but primarily to serve as what is called gas payment, which is another way of saying it’s the token that’s used to buy or rent computational power to underpin the functionality of the applications that are being built on Ethereum’s technology.

But not only that, ETHis also used as the number one exchange token for initial coin offerings (ICOs).

That is, when a company conducts an ICO, it creates a token that is ERC20 compliant, meaning simply that it can be stored in an Ethereum wallet. This allows it to form the basis of a smart contract which, when one while it receives ETH (i.e., when the wallet that serves as a collection wallet for an ICO receives funds), automatically distributes the ERC20 complaint token that’s associated with the company conducting the ICO to the wallet that initially sent the ETH.

The key point to recognize here is that ETH has a number of roles outside of those commonly associated with what we might deem a traditional cryptocurrency – value storage, transactions, etc.

It’s this role extension that resulted in Ethereum holding its value for two weeks longer than many of the major alternative coins ahead of the wider market correction in January (as mentioned above, ETH peaked on January 15, while the major altcoins peaked on January 4 and BTC peaked late December).

Additionally, it’s what limited (to a degree) the overarching decline in the market capitalization of ETH as the wider markets corrected. Many of the major coins declined between 60% to 80%, while Ethereum slipped 49% highs to lows.

It’s still not great, of course, and as far as traditional equities markets go, a cost 50% decline is a disaster, but in the cryptocurrency markets, and especially against the backdrop of the bloodbath we have seen across other points over the last few weeks, it’s a drop in the ocean.

So what comes next?

We think that ETH is on the up from here on out. Not only is the coin now subject to positive sentiment as bitcoin and its compatriots turn around, there still huge demand for it as a basis for the ever-expanding ICO market – the month that we see as central to this one holding its position as the number two coin (and perhaps outpacing bitcoin sooner or later) for the foreseeable future. 

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Disclaimer: This article should not be taken as, and is not intended to provide, investment advice. Global Coin Report and/or its affiliates, employees, writers, and subcontractors are cryptocurrency investors and from time to time may or may not have holdings in some of the coins or tokens they cover. Please conduct your own thorough research before investing in any cryptocurrency.

Image courtesy of Ethereum.