It’s been a horror week for cryptocurrency investors and the outlook just got more dire.
Crypto enthusiasts have been dealt a fresh blow after a technical analyst warned that one of the most prominent blockchains could shed a further 80 per cent of its value.
Ethereum, which has the second largest market capitalisation of any cryptocurrency behind bitcoin, is set to lose the majority of its worth in the near future, an expert has predicted.
The ether token has already lost 60 per cent of its value since it reached an all-time high in November last year.
At time of writing, ethereum was trading at $US2000 ($A2850).
However, John Roque from 22V Research said he expected that number to drop as low as $US420 ($A600) if the coin can’t rally, according to Bloomberg.
Mr Roque was not hopeful, saying in a note earlier this week that ethereum is “oversold daily and oversold weekly and cannot rally”.
It’s been a horror month for cryptocurrency – a stark contrast to this time last year – after first being impacted by US Federal Reserve interest rate hikes, and then having the industry targeted by an “evil genius”.
‘Evil genius’ blamed for blockchain ‘death spiral’
Economic pain surrounding cryptocurrency reached new heights last week after a different blockchain plummeted by 98 per cent in the space of just 24 hours.
Terra (UST), which was previously among the top 10 most valuable cryptocurrencies in the world, slumped below $US1 ($A1.42) on Wednesday.
That’s despite peaking close to $US120 ($A170) only last month.
Its market cap plunged from above $US40 billion ($A57 billion) to just $US500 million ($A719 million) on Friday in what was dubbed as a “death spiral”.
Terra’s creates officially suspended the crypto, with the company tweeting: “The terra blockchain has officially halted at block 7607789.
“Terra Validators have halted the network to come up with a plan to reconstitute it.”
At time of writing, terra was listed as being worth a pitiful $US0.0001897, according to CoinMarketCap.
Terra’s collapse had a knock-on effect on the broader cryptocurrency market with the price of bitcoin falling to its lowest level since December 2020, at $US25,000 ($A35,000) at its lowest.
Ethereum also fell by 16 per cent.
The coins have since recovered somewhat.
Terra, an “algorithmic” stablecoin with its value backed by a sister token known as luna, broke that crucial peg, which saw its value fall to just US0.30 ($A0.43). The idea behind that arrangement is that if terra fell below $US1, it could be swapped for luna, which was supposed to ensure stability – but this week, both crashed simultaneously, with luna collapsing by a devastating 98 per cent, with some investors losing their life savings.
Some have attributed terra and luna’s massive price drop – which should have been an impossibility – to an “evil genius” pulling strings and manipulating markets in the background.
Others have pointed the finger at big US hedge funds and trading firms for causing the collapse owing to the billions involved in trades that went down.