Ether Prices Fall to Lowest Since February as Sentiment Sours

Markets Weekly is a weekly column analyzing price movements in the global blockchain token markets. This edition looks at the week from 3rd through 9th December.

The price of ether extended recent losses this week, falling to its lowest in more than nine months.

Over the seven-day period, the blockchain token declined to as little as $5.98 on 6th December, its lowest price since late February. This figure, which beat the previous nine-month low set the previous day, represented a 22.9% decline from the cryptocurrency’s opening price of $7.76 on 3rd December.

The continued struggles faced by the digital currency are now translating into frustration for traders and market influencers.

"The novelty is wearing off," said Tim Enneking, chairman of cryptocurrency hedge fund EAM.

Enneking argued that ether, despite its original hype, is simply behaving as most blockchain tokens historically have, riding high on a "flavor of the month effect" before tapering off.

Enneking told CoinDesk:

"The major ones are greeted with acclaim, skyrocket and then plunge to earth. Look at Zcash and, further back, Litecoin. All the same thing."

Fading star

That the price of the protocol's token is sputtering is perhaps not surprising. As a technology, ethereum has run into numerous challenges of late, undergoing several hard forks and one network split in 2016.

Most recently, ethereum underwent a hard fork (a technical change during which all of its users have to opt in to a new version of the blockchain) in an attempt to make it easier for developers to remove the after-effects of an attack.

Then, only a few days later, the platform suffered a mini fork when two of its clients, Geth and Parity, failed to implement the latest hard fork the same way.

Petar Zivkovski, director of operations for leveraged bitcoin trading platform Whaleclub, summed the platform’s situation up by calling its growth "lackluster".

"Recent events [have] majorly undermined its attractiveness to new money and new developers," he told CoinDesk.

Amid the challenges, ether prices have been experiencing "a long, downward trend," said algorithmic trader Jacob Eliosoff.

Yet, he stressed that the recent dip below $6 was only temporary, as ether prices surpassed $8 on 7th December and reached a weekly high of $8.86 the following day, CoinMarketCap data shows.

Bitcoin remains buoyant

But while ether has recovered over the last few days, bitcoin continually exceeded $770 during the week, putting the digital currency firmly within reach of surpassing its annual high of $781.31.

At the time of reporting, bitcoin prices had reached as much as $772.47 in the past seven days, according to BPI figures.

Both Zivkovski and Enneking credited China and India with helping fuel these price gains – the former nation provoking the concern of its citizens by imposing capital controls and repeatedly taking steps to devalue the yuan.

While such macroeconomic events helped drive bitcoin prices higher, the digital currency also benefited from growing enthusiasm, Zivkovski told CoinDesk.

There has been "a spike in interest in bitcoin around the world and an unprecedented transfer of wealth from altcoins to bitcoin", he said, adding:

"This indicates that investors in cryptocurrency do not feel they've been rewarded well for the risk they've taken investing in altcoins over the past few years and are now looking for a less risky (albeit still risky) alternative."

In spite of the digital currency's resilience, Eliosoff provided a cautionary note, emphasizing that he is unsure who exactly is purchasing bitcoin at its recent values.

"My guess is the usual, Chinese investors seeking store-of-value, but if there's data to support it their Indian counterparts may be playing a role too," he told CoinDesk.

Bullish sentiment

Even though bitcoin has been repeatedly nearing its annual high, there is evidence that traders are rather bullish about the digital currency's future prospects.

The market has been more than 80% long in the 30-day, 60-day and 90-day periods through 9th December, Whaleclub data reveals. The market has been particularly bullish over the last week, as it was 88% long during the seven days through 9th December.

"In aggregate, the average holding time for long positions has almost tripled in the past three months alone," said Zivkovski.

He said:

"This indicates that traders see little downside and have a longer bullish time horizon with respect to bitcoin."

He added that, while there are bearish wagers, these bets are more rare. "We do see large shorts come in occasionally, but they are held almost 25 times less time than longs."

As bitcoin continues to obtain greater adoption, this growing acceptance could combine with heavily bullish sentiment to fuel some impressive gains.

Wilting flowers image via Shutterstock