
The Ethereum Price Drop: A Fundamental Analysis - finiteregress
https://blog.sfox.com/the-ethereum-price-drop-a-fundamental-analysis-a0b34b62ba
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timoth3y
I don't think the author understands what "fundamental analysis" is.

If you really wanted to do a fundamental analysis you could, for example,
calculate the size of the services built on top of the Etherium blockchain,
calculate the amount of gas required to execute those instructions, look at
the total supply of Ether and thereby calculate some kind of intrinsic value.

I have not done this, but I'm pretty sure the results would not make crypto-
bulls very happy.

Sadly, this article is the same kind of speculative storytelling that infects
most of what is written about the blockchain. I like the idea of applying DCF,
but using previous S&P returns as a proxy for ETH usage growth is nonsensical.

The math in this article suffers from GIGO.

Edit:

I found a much better attempt at analyzing fundamentals. I would quibble with
the author's choice of fundamental -- I think more fundamental metrics are
available, but his choices make sense and its an interesting read.

[https://medium.com/@cburniske/bitcoin-ethereum-prices-are-
do...](https://medium.com/@cburniske/bitcoin-ethereum-prices-are-down-more-
than-the-fundamentals-88fd18a86d14)

------
gomox
This is a fairly superficial article recapping what I would call "the naive
narrative" about the crypto price drops. I.e. it's the information you would
get if you asked a random person at a conference why they think the price is
dropping: "ICOs are selling and retail investors are running away". Except
ICOs haven't sold much [1] and retail investors amount to peanuts in the grand
scheme of things. Who bought at $20K and is selling now? Likely almost nobody.

Any real analysis needs to talk about trading volumes, issuance rates and
profitability of miners, and market depths. Those are the macro variables that
are surely at play for a crash of this magnitude. But most of this information
is hard to obtain from reliable sources (i.e. trading volumes on Coinmarketcap
are usually assumed to be 97% wash trading bullshit, mining operations are
fairly secretive, and large exchanges likely operate some sort of cartel).

So a more accurate answer to "why is crypto dropping" is "someone that has a
lot is selling". More specific answers are, to the best of my knowledge, not
out there yet.

If you have a better theory I'm intrigued to hear it.

[1]
[https://twitter.com/lawmaster/status/1039224845807116288?s=1...](https://twitter.com/lawmaster/status/1039224845807116288?s=19)

~~~
schmichael
There is great irony that a technology predicated on all transactions being
public, has by far the most inscrutable, opaque, secretive market.

I know it's because almost all trading takes place off-chain on secretive
unregulated or lightly-regulated exchanges, but I still find it a significant
demonstration of the limited scope of the technologies basic tenets (see also
my comment about how it's not "trustless" in a meaningful way).

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CPLX
That article has a lot of words in it. I feel like I could write an analysis
of the fundamentals in one sentence. Let's try:

Ethereum doesn't have any fundamentals, as it's not a claim on productive
assets, so its entire value to date has been as a medium for gambling.

~~~
erulabs
Your comment is a nice summary of the vitriol surrounding crypto. I have never
seen such an anger surrounding a technology since maybe printers or possibly
whatever device Planned Parenthood uses to perform abortions.

While gambling is an extremely obvious one (secure and trust-less escrow
certainly appeals to the black-market), you _must_ be being disingenuous to
posit "Ethereum doesn't have any fundamentals".

The US Dollar is also no longer a "claim on a productive asset" \- in your
mind, do only stocks count as a claim on a productive asset? Because stocks
(as well as mortgages and physical assets) can, have, and will continue to be
represented by Ethereum contracts...

~~~
TACIXAT
When you dress something up like a stock (ownership of a piece of a company)
but there is nothing behind it, it really starts to look like a scam. That is
where the hate comes from. There are no fundamentals to analyze.

For Ethereum, what do you propose? It is a way to buy incredibly inefficient
computation. What are the killer smart contracts? How does the price reflect
the price of computation? Has someone made a more efficient EVM? A less
efficient one?

The US dollar is the currency that you need to use in order to participate in
the largest world economy. No one claims it has a market cap. No one claims it
is going to the moon. No one tries to analyze it's fundamentals. No one is
pretending it's a stock.

~~~
erulabs
No one tries to analyze the fundamentals of the US Dollar? I would argue the
single most powerful agency of the Federal Government of the United States
spends the majority of its time doing _exactly_ that...

~~~
AnimalMuppet
Of all the things that TACIXAT said, that was the only sentence you found that
you could argue with. That leaves the rest of his statements unchallenged.

~~~
erulabs
That’s not his assertions work, nor refutations. Other posters replied to his
other sentences... I’m not entering into an argument with someone who has very
obviously made up their mind - rather trying to point out a basic logical flaw
in their argument that, I would hope, causes readers to think critically about
the other assertions. The worlds most relied upon currency is fiat - ethereum
is not. Thus, the fundamentals argument ought to be closely examined.

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randaouser
HN community definitely is an echo chamber when it comes to cryptocurrencies
and its a shame. My question to my fellow HNers is do we see no merit in a
censorship resistant framework which builds a trustless execution environment.
I dont think any legitimate crypto dev pushes a narrative to move all cloud
services to ETH

As internet served as a conduit to open and accessible knowledge to the world,
crypto has the potential to open value exchange globally without the need for
trusted entities.

Granted there are fast and established solutions available today for money
transfer, however, they all rely on a trusted entity that under the right
political pressure will compromise a user and thus is not censorship
resistant.

~~~
hudon
> do we see no merit in a censorship resistant framework

This is a loaded question... Cryptocurrencies are not "censorship resistant".
If they were, maybe your complaint about HN's "echo chamber" would be
warranted.

Here are some censorship examples:

1\. BTC: OFAC has listed Bitcoin addresses that you cannot legally send money
to. If you do, expect fines/jail/interrogation/etc.

2\. ETH: If you exploit a vulnerability in a contract, your transaction will
be invalidated.

3\. BTC: If the devs decide to abandon the longest chain like they did in
2013, any transaction on the forgotten chain will be effectively erased from
history.

There are more, but admittedly they require a bit of thinking to realize that
they are in fact censorship. Everything is obfuscated when it comes to
blockchain, which is why it's managed to fool so many smart people into taking
its claims as granted.

~~~
whyte_mackay
At least crypto is way more censorship resistant than oldschool money. That's
why it is called "censorship resistant" not "censorship proof". Claim stands.

Make a Jewish joke and Paypal will not be your friend. Piss of governments and
Visa and Mastercard will make it impossible to donate to your cause.

~~~
spookthesunset
Ah bitcoin, standing up and providing a platform for all the racists,
antisemites and bigots of the world. Don’t forget all the drug kingpins,
terrorists, child pornographer peddlers, and crypto-ransomware makers too!

~~~
dang
Please don't post unsubstantive comments here.

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holoduke
I believe all the bitcoin and eth are down because the commoners/speculators
stepped out. It's only used currently for black market stuff. And that is also
moving to other coins with better cloakabilities. Bitcoin and ether will
slowly come to an end. Maybe it will one day be seen as ancient crypto relics
and therefore still have some value. But not anytime soon

~~~
JauntTrooper
I’ve always been concerned the majority of trading was done by large players
manipulating the markets through churning and pump and dump.

With truly anonymous participants, what’s stopping someone from trading with
himself over and over again, creating the illusion of trading volume and price
appreciation?

~~~
gomox
In trustworthy exchanges, trading fees.

On Binance or the like, nothing, or market risk (i.e. other market actors
profiting from your wash trading), depending on the level of cartelization you
assume in the crypto whale demographic.

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acjohnson55
Great article. It's so difficult to find writing on the space that isn't
cryptomaximalist, completely dismissive, or technical analysis mumbo jumbo.

Ethereum is intriguing to me. Since it's not designed to be a deflationary
ponzi scheme, it's not clear to me what its value will be over time. It
appears to have more ways to win than Bitcoin, but also more ways to lose. I
think the answer is: don't buy it to speculate; treat it as a means to an end
when the need actually arises. That's almost rational.

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empath75
They didn’t explain how the run up in all crypto currencies was driven by
bitfinex’s unprecedented counterfeiting operation.

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kadendogthing
Analysis: It's tech beanie babies.

~~~
shemnon42
Incorrect. CryptoKitties, not beanie babies.

~~~
bhaak
Digital pokemon cards.

------
spir
I think that in a general macro downturn, cryptocurrencies fall further than
other asset classes:

In a macro downturn, cash becomes more valuable, and, ceteris paribus, this
decreases the cash price of all assets, including crypto.

The popular expectation of above-market returns in crypto is sufficient to
create price volatility. A segment of crypto holders will sell when they
believe above-market returns won't happen in the short to medium term.

Obviously, downward spirals of selling occur in all/many asset classes. I
think the expectation of above-market returns in crypto makes these spirals
stronger.

~~~
Steko
> a macro downturn

> segment of crypto holders

> spirals of selling

Time of transition

The more timid element

Will run for cover

