It has been a horror week for cryptocurrency investors and the outlook has become more dire.
Crypto enthusiasts have received another blow after a technical analyst warned that one of the most important blockchains could lose another 80% of its value.
Ethereum, which has the second-largest market capitalization of any cryptocurrency behind bitcoin, is expected to lose the majority of its value in the near future, an expert has predicted.
The ether token has already lost 60% of its value since hitting an all-time high in November last year.
At the time of writing, Ethereum was trading at US$2,000 (A$2,850).
However, John Roque of 22V Research said he expects that number to drop to US$420 (A$600) if the coin cannot rally, according to Bloomberg.
Roque had no hope, 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 the cryptocurrency – a stark contrast to this time last year – having first been hit by US Federal Reserve interest rate hikes and then targeted the industry by an “evil genius”.
‘Evil genius’ blamed for blockchain ‘death spiral’
The economic pain surrounding cryptocurrency reached new heights last week after another blockchain plummeted 98% in just 24 hours.
Terra (UST), which was previously among the top 10 most valuable cryptocurrencies in the world, fell below US$1 (A$1.42) on Wednesday.
That’s despite peaking near US$120 (A$170) just last month.
Its market cap fell from more than $40 billion ($57 billion) to just $500 million ($719 million) on Friday in what has been dubbed a “death spiral.”
The creators of Terra have officially suspended the crypto, with the company tweeting: “The Terra blockchain has officially stopped at block 7607789.
“Terra Validators shut down the network to come up with a plan to get it back together.”
At the time of writing, terra was worth a pitiful US$0.0001897, according to CoinMarketCap.
Terra’s collapse had a ripple effect on the broader cryptocurrency market, with the price of bitcoin falling to its lowest level since December 2020, at US$25,000 (A$35,000) at its highest. low.
Ethereum also fell by 16%.
Coins have since recovered somewhat.
Terra, an “algorithmic” stablecoin whose value is backed by a sister token known as luna, broke this crucial peg, which saw its value drop to just US0.30 ($A0.43). The idea behind this arrangement is that if terra fell below US$1, it could be swapped for luna, which was supposed to provide stability – but this week the two crashed simultaneously, with luna collapsing by 98% devastating, with some investors losing their life savings.
Some have attributed Terra and Luna’s massive price drop – which should have been impossible – to an “evil genius” pulling the strings and manipulating the markets in the background.
Others have pointed the finger at major US hedge funds and trading companies for causing the collapse due to the billions involved in the deals plummeting.