Gas is not gold: why the price of Ethereum will fall even in case of success of the project?

The enthusiasm of the holders of Ethereum, fueled by the sharp growth of the cryptocurrency in January, now changed to the opposite. Recently, the ETH has fallen below $ 200, while the main culprit for the fall was all the same ICO, which last year led to the rapid growth of the coin.

Bear market put everything in its place — second by market capitalization cryptocurrency really depends on bladder ICO. Will there be a new wave of growth in the near future? Blockchain Ethereum is developing for sure, but even that likely won’t be able to affect the price of the coin. However, it is believed that there is no correlation between the price of Ethereum and its utilisation in the world. This writes Coindesk.

Why you should not rely on the growth of cryptocurrencies

The theory is based on the price and usefulness of the crypt led the managing Director of Union Square Ventures albert Wegner. In his opinion, the increase in the cost of token rewards the developers and encourages them to further work on Baccano.

Many analysts also believe that in the future the Internet will come blockchain. Now the developers are forced to directly charge users for their services. Any, even the supposedly free portals in the Internet in some way monetized.

However, will the tokens (the medium of exchange/savings, call them what you want) a good replacement for monetization? What if the increase in their prices is contrary to the expediency of use?

Good money — bad money

In fact, the problem has much in common with the law of Gresham, which States that “bad money always drives out good”. In other words, “bad” currency (exchange medium) must not be attractive as an investment or a means of capital preservation.

If the currency has a “good quality”, that is, it is durable, fungible, scarce, and cannot be impaired by some centralized Issuer — it will attract investors. Why exchange currency, which is constantly increasing in price?

That is why the traditional vietna economy is in “bad” money. In this situation, take into account the interests not of the individual (enrichment, accumulation, and so on), and the whole society. Any national currency is expected inflation, which forces citizens to get rid of their money and stimulate the movement of the money supply in the country.

The father of monetary Economics, Milton Friedman argued that a stable inflation rate is very desirable for the development of the state. It is in any case not an argument in favor of currency devaluation and rampant abuse of power. We are talking about the optimization of the ratio of interchangeability and the value of the currency.

This is exactly the main problem of Bitcoin. This is a very “good” currency from the perspective of the indispensability and scarcity. Now, however, it makes no sense to use the cryptocurrency as a medium of exchange to anyone who wants to get rid of their coins and all the holders are looking forward to the increase in the price of the asset.

Many cryptomnesia think that once Bitcoin becomes the “new gold”, it is quite possible to be used as a world currency. Time will tell if they’re right, but while such a theory does not have sufficient evidence. Perhaps in the future, the Lightning Network can facilitate the exchange of bitcoins, but the problem of deflation is not going anywhere.

And what does the Ethereum?

Earlier Twitter started an interesting discussion around smart contracts on Ethereum. One of the members of cryptocommunist expressed the belief that use of the platform depends on the transaction and ETH “gas”. According to experts, such a principle is entirely contrary to the concept of the movement of the money supply.

During last year’s boom in the Ethereum ICO was quite a practical application. Holders had their coins for investment in promising startups, because they accept mostly ETH. Now the situation has changed — the same developers are quickly drained the accumulated Ethereum at the market price, and investors are no more good reasons to keep coins.

Stellar developer Jeremy Rubin said that sooner or later the price Ethereum will drop to zero. In his opinion, if the creators of the new platform Ethereum will go to your blockchain, cryptocurrency will gradually lose its value. Even the acne Buterin did not rule out such a scenario, but only for other reasons.

How to determine the value of the asset

Point of view ruby has the right to life. However, it is difficult to believe that the demand for such a promising project may fall. Moreover, with the move to PoS value of Ethereum can fly back in several times. The future will show how much the value of cryptocurrency is correlated with its price.

Perhaps this debate will lead us to a new round of development of decentralized applications. If the tokens will be a useful unit of exchange within the ecosystem of any platform, the DApps will cease to be a mere “facade” to collect money from gullible investors.

SUBSCRIBE TO OUR CHANNEL IN THE TELEGRAM. BOOK YOUR SEATS IN THE ROCKET TO THE MOON!

Leave a Reply

Your email address will not be published. Required fields are marked *