Ethereum is inside of a bubble, and traders woke up to a shocking revelation on Thursday – the currency can crash. Bitcoin, by far the dominate crypto-currency, hit $3,000 over the weekend after just pushing through the $2,000 mark less than a month prior.
Ethereum is in trouble, and while the currency is riding on a high right now, the crash last night is the first sign of a bubble, or so I think.
Ethereum Rising on Russian Influence
If we take a step backward, it doesn’t make sense that Ethereum is skyrocketing at its current rate. The currency is up 3,600% since the start of 2017 – that’s a massive return. The rise f the currency is on the back of a meeting with Vladimir Putin, Russian president.
Putin, the long-time Russian President and political powerhouse, has the power to help support Ethereum.
Following the meeting with the founder of Ethereum, Vitalik Buterin, the currency skyrocketed. There have been many rumors surrounding the meeting, with rumors that Putin plans to:
- Digitize the ruble
- Develop digital currencies
Sure, the currency benefits from much faster transactions and it has its own benefits, but what happens when a crypto-currency tumbles? In Ethereum’s case, it rebounds overnight, and a lot of investors lose their money in the process.
Ethereum Investors Will Be More Cautious
Forex traders flocked to Ethereum, and it makes sense: the currency is surpassing even the wildest expectations. The problem is that the currency, like all digital currencies, is still so new. There are kinks that need to be worked out, and a lot of investors are only seeing dollar signs instead of red flags.
A multi-million dollar sale of the currency caused a ripple effect overnight on Wednesday, causing the currency to fall from over $300 to $0.10 on one exchange. That’s a staggering loss, and one that I think will change the industry for the better.
The introduction of Wall Street firms showing interest in digital currencies and the flash crash may be the best thing for the digital currency revolution.
Let’s go back to 2010 when the Dow Jones Industrial fell a staggering 1,000 points, or close to it, and then rebounded. The event caused the SEC to implement new rules to halt stocks if a 5% move, either up or down, occurs.
The SEC’s measures are what I believe many exchanges will implement for digital currencies in the very near future.
Something has to change when a currency trades at over $300 and then plummets to $0.10 for even a few minutes. A lot of people lost money with the GDAX exchange, which says that all sales are final.
Traders aren’t going to risk losing a fortune in crypto-currencies if the same event is a common one.
Sizeable investors may hold back from the market until something is done, and now is the time to correct this imminent threat. Crashes will happen again in the future if measures aren’t taken. Exchanges may even disappear if the same crash happens again.
My opinion, or at least my hope, is that exchanges are moving quickly to prevent a future flash crash again.