By Gaurav S. Iyer, IFC Published : December 20, 2017
Are Investors Leaving ETH?
There is no question that Ethereum is the second-biggest and second-most famous cryptocurrency in the world. It is fast becoming a household name. And yet, despite its surge in popularity, some investors are still asking: Will Ethereum crash in 2018?
Sorry, but the answer isn’t what you might think. I mean, yes, Ethereum prices might crash within the next year. But that is no guarantee they will stay down for good.
In fact, everything we know about cryptocurrencies suggests that a “bust” will be followed by an even bigger “boom.”
Don’t take my word for it, though. Look at the data instead.
In the past year, Ethereum prices have advanced 8,832%. Was it a smooth ride? Absolutely not. There were two full-scale crashes in which ETH prices fell more than 45%.
The first crash took place in the summertime. Ethereum lost 68% of its value in June and July, a steep fall that took the currency from a high of $414.76 to a low of $133.72.
Prices climbed back in August, nearly reaching their previous highs. But then another black swan appeared in the form of a Chinese cryptocurrency trading ban. This time, prices fell almost 50% to just under $200.00.
What’s my point?
Well, let’s say you travel back in time to the first quarter of 2017. You find yourself and say:
“Go invest in ETH! Right NOW!”
“Um, who are you?”
“I’m you, from the future.”
“Never mind that now. Go invest in Ethereum.”
“Why? It seems like a bubble.”
“ETH is going to skyrocket by 8,800%, you fool! You could be rich!”
“You do look like me…and I wouldn’t lie to myself…so, let’s say I believe you’re me from the future. Will Ethereum crash in 2017?”
That, ladies and gentlemen, is my point.
Yes, technically, Ethereum prices did crash in 2017. And it is likely Ethereum prices will crash in 2018. But that doesn’t mean you won’t make a net profit on your investment.
In other words, the truth is more complicated than it first seems.
Don’t believe the charlatans that try to sell you false certainty. No analyst can read the future with any degree of certainty. We are not prophets, after all.
When Will Ethereum Crash?
As I said above, no one can read the future.
However, I wouldn’t be shocked to see an Ethereum crash coming at the start of 2018.
You see, ETH prices more than doubled in the last three months, which could be a sign that markets are overheating. In such cases, investors simply run out of optimism and start extracting gains.
Then the house of cards comes tumbling down…
This type of ETH price crash would mirror the one that took place in June and July. However, I must reiterate that it’s impossible for anyone to forecast this crash to a close approximation because it depends entirely on investor sentiment.
What if the Chicago Mercantile Exchange (CME) or Chicago Board Options Exchange (CBOE) adds an Ethereum futures contract? That would give the present rally a second life, extending it well into the first quarter of 2018.
And what if the futures contract is followed by an exchange-traded fund (ETF) dedicated to cryptos? That would postpone the ETH price crash yet again.
There is simply no accounting for randomness, dear reader, which is why we advocate buy and hold strategies. If your time horizon is months and years, the day-to-day price movements shouldn’t matter.
Ethereum Alternatives After Crash
Not convinced? Don’t worry. There are several ways to hedge this bet. Namely, the other decentralized applications that compete with Ethereum.
NEM (XEM), for example, allows users to create smart assets in much the same way that Ethereum offers smart contracts. NEO (NEO), on the other hand, bills itself as the “Ethereum of China.”
Also Read: NEO Price Prediction 2018: 300% Exponential Growth Possible
Both of these currencies could provide adequate protection from an ETH price crash, as could other platforms like Cardano (ADA) or Waves (WAVES).
Whichever one you choose, try to make sure they fit the following criteria:
- Exploding Volumes: I like to see volumes spike approximately 200% to 300% annually. If this happens two years in a row, I am happy; three years in a row, I am ecstatic.
- A Limited Number of Coins: The first rule of economics is that demand and supply control prices. When demand exceeds supply, prices increase. Therefore, having a finite supply of something valuable nearly guarantees that its value goes up.
- Scalability: Cryptocurrencies need to handle more than a handful of transactions. As such, we look for cryptos that can grow up with grace. Efficiency may not capture a lot of headlines, but it is important to a crypto’s long-term viability.
- Incredible Value: Obviously, you don’t want to overpay for a crypto, however promising it might look. We try to comb through the market for underpriced assets that also fit two of the other criteria.
- Institutional Interest: Wall Street interest in Bitcoin led to the creation of a Bitcoin futures market, which in turn led to a massive rally in Bitcoin prices. This is why we watch for institutional interest in various currencies.
It is extremely rare—some would say impossible—to find a crypto that checks “all of the above.”
You’re much more likely to find a currency that meets three out of five, which is a pretty decent indicator that you should dig deeper. That currency might potentially skyrocket.
Yes, an ETH price crash could happen in 2018. However, those willing to ride out the volatility—or willing to “buy the dip”—could see ETH recover and continue its upward journey.
Also Read: Is Litecoin (LTC) Going to Crash?