Ethereum price weekly analysis: Transaction troubles

Rhys Muter 21 January 2018 NEWS

ITIDespite a resilient week in a tough crypto market, Ethereum continues to flag scaling problems.

  • Ethereum loses over US$600 in only days
  • Average transaction fee remains relatively high
  • Canadian government announces Ethereum trial in blockchain experiment

Following a hectic week on global cryptocurrency markets Ethereum (ETH) has shown resilience. After initially losing over US$600 it managed to recover most of the lost ground, after shedding less than US$250 by the close of the week, according to price information released by CoinMarketCap. In addition to that, renewed confidence in Ethereum may be coming from reports that the Canadian government is using an Ethereum-based blockchain as part of its blockchain experiment.

Price movements

ETH has had a rough and tumble week in line with the broader cryptocurrency market this week, although it seems to have a greater degree of resilience. ETH began the week trading at US$1,381.46 before a market-wide selloff reduced the price of ETH to US$780.92, representing a loss of over 43%.

After the market-wide midweek selloff ETH has been one of the best performers among the largest cryptocurrencies, closing the week barely US$250 dollars short of its position at the outset of the week. That is a good position considering some of the substantial losses within the cryptocurrency markets during the week. With only a 17% reduction in overall price, it will be welcome news for holders of the crypto that ETH has emerged relatively unscathed.

Market capitalisation

The market capitalisation of ETH will give added confidence to the market because its change has been less pronounced than other top ten cryptocurrencies. ETH's market cap started the trading week at around US$133 billion, and in line with price differentials, dropping heavily to US$75.7 billion.

That trough did not remain long in place as the next 24 hours saw ETH’s market cap climb to US$104.1 billion. ETH’s market cap eventually closed out the week with good indications posting a market cap of US$110 billion.

24-hour trading volume

The 24-hour trading volume in ETH has declined slightly at the end of the week after the midweek trading frenzy. ETH 24-hour trading volume began trading a range between US$5.5 billion to US$4.7 billion over 14-16 January before shooting up during midweek volatility, peaking at US$9.34 billion on 17 January. Since then, ETH has settled to a more restrained trading volume consistently below US$4 billion at the time of writing.

On a less positive note, the average transaction fee for an ETH transaction remains stubbornly high at US$2, according to BitInfoCharts. Average transaction fees of above US$1 are considered a difficult level for ETH's survival. This is because the scale to which ETH would need to increase its capacity is not yet developed.

That development is necessary for ETH to compete with the efficiency of Visa or Mastercard, which becomes more doubtful the longer the ETH blockchain is dogged by scaling issues which cause high transaction fees.

However, this has not prevented the Canadian government from trialling the blockchain to issue information of government grants and is an example of growing market confidence in the Ethereum blockchain.

Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade. Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.

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