ETH continues its downward spiral

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Jul 15, 2019

The cryptocurrency market took quite a beating over the weekend with both Bitcoin and the majority of altcoins seeing red. Ethereum in particular, jumped off a cliff.

After making new local USD highs on June 26th ($346.56 USD), things just spiralled down for ETH as it continues to show weakness in both USD and BTC pairing. Actually, things are looking worst in the BTC pairing - ETH broke the 2-year support level to make new lows, hitting 0.02177 ETH/BTC.

So what could be the cause for the downward price action?

Price manipulation?

According to Twitter user @islandhunting, the sharp decline was largely thanks to price manipulation of 15,000 ETH being dumped at illiquid exchange Bitstamp (Price of ETH went as low at $191 USD.) This then set off liquidations on Bitmex that rippled through the cryptomarkets.

Given that most DeFi platforms like Maker CDPs and dYdX uses ETH as collateral, they were not spared as well. Both platforms saw their highest liquidation within a 1 month period.

Collateral liquidated:

Maker: $2,662,325 USD

dYdX: $3,161,439 USD

Ethereum scaling doubts?

2 days ago, Vitalik started a thread on eth.research about the possibility of using Bitcoin Cash: a short-term data availability layer for Ethereum. In it, he mentioned:

There’s a large space of quite powerful and effective scalability solutions that rely on a non-scalable computation layer (ie. the current ethereum chain suffices) plus a scalable data layer. The general principle of these techniques is that they use interactive computation techniques (eg. Truebit 21) to compute the state on the ethereum side, crucially relying on the data availability verification guaranteed by the data layer to make sure that fraudulent submissions can be detected and heavily penalized. One could use techniques like this to make a highly scalable general-purpose EVM-like system.
In the longer term (1+ year out) the scalable data layer is going to be ethereum 2.0, because its planned 10 MB/sec data throughput is much higher than that of any existing blockchain. In the shorter term, however, we can start working on these techniques immediately by using existing blockchains, particularly those that have lower transaction fees per byte than ethereum, as the data layer. Bitcoin Cash arguably fits the bill perfectly for a few reasons:
High data throughput (32 MB per 600 sec = 53333 bytes per sec, compared to ethereum ~8kb per sec which is already being used by applications)
Very low fees (whereas BTC would be prohibitively expensive)
We already have all the machinery we need to verify Bitcoin Cash blocks inside of ethereum thanks to 39 ; we just need to repoint it to the BCH chain and turn it back on. Verifying BCH blocks is also quite cheap compared to eg. ETC blocks
The BCH community seems to be friendly to people using their chain for whatever they want as long as they pay the tx fees (eg. 37)

Perhaps this might have lowered confidence in investors of Ethereum's scaling solutions.

Crowd's reactions

  • I am stacking eth right now, its SO low in relation to btc right now. I can see it going back up to .07 or even .1 btc eventually.
  • Ethereum is a failed project. Not decentralized, so no real purpose to exist. The world doesn’t need ethereum, defi, world computer, etc. this is the market telling you that. Eth 2.0 is a meme to distract people from the fact that 1.0 was/is a complete failure. There’s a reason bitcoin dominance is the only thing going up. It’s the only thing potentially worth owning. Every alt is garbage. The truth hurts I know, I’ve been there.
  • I went 4x long at 326. I was liquidated at $250 ETH I am stupid The worse part is I used 20 ETH Thats a big portion of my bag.
  • Looks like some whales are leaving... but why tho, why now
  • Thoughts? Why would this be happening with ETH 2.0 around the corner..
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Jul 15, 2019

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