Ethereum (ETH) is the most popular platforms for ICOs. More than 80% ICOs (Initial Coin Offerings) held so far have been conducted on the Ethereum Blockchain. They are termed as ERC20 tokens. Up until recently, the general understanding was that with the passage of time, more and more projects will opt to conduct their ICOs on Ethereum (ETH) and thus its market cap will continue to shoot up over time. However, recently that notion was rejected when projects like EOS (EOS) and TRON (TRX) announced to escape the shadow of Ethereum (ETH) and instead launch their own main nets.
Not only has this resulted in more competition for Ethereum (ETH), but it has also resulted in a serious supply pressure resulting from the dumping of large amounts of Ethereum (ETH) on open exchanges. As competitors of Ethereum (ETH), platforms like Tron (TRX) and EOS (EOS) will most likely continue to resort to such tactics to manipulate the price of Ethereum (ETH) and compel investors to leave it for safer opportunities. Some of these projects have raised hundreds of millions of dollars in Ethereum (ETH) that they still hold and can dump on an exchange at any time, just like EOS (EOS) did last week on Bitfinex.
Ethereum (ETH) continues to remain the second popular cryptocurrency, one that is easy to store and transfer to and from exchanges. However, the fact that most of these ICOs were held in 2017 and that they still hold large amounts of Ethereum (ETH) waiting to cash out has raised a lot of red flags for investors. Most ICO platforms that raised funds last year are now developing companies with growing needs. This means that they will continue to get rid of significant portions of their bags of Ethereum (ETH) in order to cash out to pay for expenses.
Normally it would not be a problem as there are plenty of buyers who would be willing to buy over the counter. It makes sense for most institutional investors to buy OTC in order to avoid spiking the price up. However, the introduction of Ethereum (ETH) futures and options have made it attractive for most of these companies to dump their coins on exchanges, especially when there is no regulation stopping them from doing so. This means that they will open short positions or buy put options for Ethereum (ETH) and then proceed to dump their coins on exchanges like Bitfinex through their operatives. This is the beginning of a really dangerous trend which if not stopped in time has the potential to pollute the entire crypto market.
While some coins may be immune to such manipulation, Ethereum (ETH) is definitely not one of them. Last week was a perfect example of how Ethereum (ETH) price was manipulated when ETCUSDShorts on Bitfinex were up more than 25% in one day in anticipation of EOS (EOS)’s ETH dump. Normally, these short positions should have been liquidated soon after the first EOS (EOS) dump. ETCUSDShorts would now be down significantly if it was over. However, the fact that EOS (EOS) and other former Ethereum (ETH) projects still hold a large amount of Etheruem (ETH) coins that they can dump on an open exchange at any time has resulted in significant supply pressure on the coin which will most likely continue to exist until measures are taken to regulate or ban dumping of Ethereum (ETH) on open exchanges by these projects.