Ethereum has seen its value go down by 36% in the past year. Being the world’s second largest cryptocurrency, it is surprising that it is falling at all, but what is even more shocking is that many investors, cryptocurrency enthusiasts and market participants are betting against the fact that the cryptocurrency may see more losses over the next couple of months.
The cryptocurrency, at the time of writing hovers right under the nose of the $500 USD mark at $482.13. And many hedge funds and investment banking companies are gearing up to make the most of the slump in the valuation of the world’s second largest cryptocurrency.
Shorting of Ether
Utilising a technique that is very well known and utilized extensively in the traditional stock market, investors are shorting their ether holdings. Shorting is when an investor borrows shares and sells them as soon as possible with the longtime plan of scooping the shares back when they are at lower prices and hence benefitting from the price difference between them.
The number of high profile companies and investors that are shorting the cryptocurrency is insane. With names like Tetras Capital and Timothy Young among them and rumors have it that Neural Capital has done the same. With Tetras, known for its highly accurate reports that are backed by painstakingly deep research, shorting Ether back when the coin was doing seemingly well at $659.
Betting On A Fall
With all these big names and companies shorting Ethereum’s cryptocurrency Ether, it is clear that there is a growing feeling in the community and among accredited investors is that the cryptocurrency has a lot more to fall in the next couple of months.
What seems to be the concern on the minds of people that are betting on the slump is that there is a very large discrepancy between the $48 billion market cap and the number of transactions the Ethereum blockchain can do per second.
The Ethereum Blockchain at this point can only do about 15 transactions a second and with not more than 5,000 users on any of their applications that are running on the platform, the blockchain is nearing its full capacity.
Another reason that investors are convinced that the cryptocurrency is about to take a monumental fall is that the company Ethereum is not controlled by one governing body or company, it has multiple companies running on its platform and is essentially an independent incubatory service for cryptocurrency projects and startups.
The founder of Tetras Capital, Alex Sunnarborg went on record and said that, “Just because something is a good idea, it does not mean it is a good investment.”
According to the community grapevine, other names like Multicoin Capital are in serious consideration of shorting the cryptocurrency while other market influencers like CoinShares’s chief strategist remains neutral when it comes to the polarising stands his contemporaries are taking.
Either way, it is pretty clear that most investors of Ethereum are unhappy with the scalability of the Ethereum Blockchain and it is something that the developer team at Ethereum will need to work on to keep their position as the world’s second largest cryptocurrency; second only to Bitcoin.
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