Earlier on Sunday, on the 9th of September, the price of ETH, the essential currency of Ethereum, slip to its yearly low at $185.
While ETH rebounded above the $200 mark after an unforeseen recovery of Bitcoin from $6,190 to $6,450, since July, ETH saw a steeper decline in value than some other significant cryptocurrencies.
How much is it because of the selloff of ICO?
Last year, the price of ETG surpassed the $1,500 mark and investors of ERC20 tokens on the Ethereum protocol which was advanced from 10 to 100-fold returns from their Initial Coin offering or ICO entry.
Some investors in different tokens such as EOS, Ontology, ICON, Zilliqa, as well as 0x, saw massive gains late in 2017, at the peak of the cryptocurrency market.
But, in the past several months, the price of ERC20 tokens fell substantially against Bitcoin, which also experienced a 70% fall against the US dollar. Ontology, as well as ICON, saw 75 to 80% losses against Bitcoin, losing out by more than 95% against the US dollar.
Most of the analysts in the crypto sector have attributed the decline in the price of ETH to the selloff of ERC20 blockchain projects which have raised millions of dollars in ETH in their token sales.
As the price of Ethereum started falling and the crypto market entered a significant bear market, analysts said that ERC20 projects began to sell their ETH holdings, in that way causing ETH to experience a more strong downtrend than some other significant cryptocurrencies.
Also, it is evident that the decision of ERC20 projects on Ethereum to sell vast amounts of ETG in panic largely contributed to the downtrend of ETH.
Can it be prevented from happening in the future?
Last week, the co-creator of Augur, Joey Krug, responded to some the criticism made by investors from the community on the resolution of the augur team to sell ETH at $0.7 to fund the operation of the project.
Krug has stated that Augur sold all of the Ethereum which it raised in its token sales right after its ICO to fund its development, adding that Augur is not a hedge fund, but it is only a project that works to result in a more inclusive decentralized system.
If Augur had sold its holdings as ETH reached $1,000 last year, instead of $700,000, it could have raised a billion dollars.
But, Krug also emphasized that investors in the ICO market do not afford the capital to blockchain projects to operate as hedge funds but to maximize their resources in order to build a successful decentralized application or protocol.
The massive selloff of ETH was initiated by ICOs
The 0x advisor an and the co-founder of Scalar Capital, named Linda Xie, said that her team was advising projects to liquidate their ETH upon their token sale to fund operations.
She said that the team of Augur did the right things and she was advising projects to do the same. She said that it is easy to see all of this in hindsight as the price of ETH could have quickly gone the other way while building.
The massive selloff of ETH, which was initiated by ICOs, happened as ICOs wanted to avoid missing out on a rally as Augur did in 2016. But, not just is it tough to measure the top and bottom of assets, investors did not raise millions for ERC20 projects in order to trade, as well as invest in the crypto market.
The approach of Augur, Xie, as well as some other prominent projects, investors, and accelerators for preventing blockchain projects from operating like hedge funds to open-source developer communities could actually also limit an intensified downtrend for ETH in the future.