Ethereum has quickly recovered from a flash crash last week, in which the cryptocurrency went from the price of $317 to $0.10 in a few seconds.
But now, after several unsubstantiated — or just plain old — news reports over the weekend, Ethereum seems to be experiencing a real correction.
Ethereum is a cryptocurrency and a payment system, just like the better-known Bitcoin, but it's also a decentralized platform that allows developers to build and run applications. Its currency, ETH or Ether, soared in value in the last six months or so, jumping from about $10 per ETH token to about $380 last week.
But ETH is currently trading at about $263, according to Coindesk, losing about 20% of its value in the last 24 hours alone.
The drop in price is likely fueled by several erroneous news reports. The first one apparently originated on the anonymous messaging board 4chan, where Vitalik Buterin, co-founder of Ethereum, was proclaimed dead after a car crash.
Buterin squashed that rumor by posting a blockchain-based proof of him being alive on Twitter early Monday, but that didn't stop the Ether price from falling.
The Times added fuel to the fire by posting a statement from entrepreneur Brock Pierce, who'd apparently said (The Times offered no source or context for the quote) that it was British programmer Gavin Wood, and not Buterin, who'd written “100% of the code” for Ethereum.
But this is not exactly news. Wood is a co-founder and was at one point a lead developer and CTO of Ethereum, so it would make sense that he'd written the bulk of the code. Wood, who is also the founder of browser-based Ethereum client Parity, states on his personal website that he "coded the first functional implementation of Ethereum (…) in late January 2014, invented the Solidity contract language and wrote the Yellow Paper, the first formal specification of any blockchain protocol and one of the key ways Ethereum distinguishes itself from other blockchain-based systems."
However, Buterin is far more prominent in the media (and active on Twitter) as the principal brain behind Ethereum, and he's the one all eyes are pointed to when something goes awry. While those who've followed the development of Ethereum from the early days are likely well aware of Wood's contributions, for some investors the realization that Buterin is not the only mastermind behind the project might be troubling.
There's a third, possibly the most important reason behind Ethereum's price slump: It's a simple correction after an intense period of growth. All Ethereum experts I spoke to in the last month or so told me the same thing: A correction is not only likely, it's probable and much-needed. Even Buterin himself chimed in a few weeks ago, saying that the only way to cure bubbles is to "let them run their course and pop."
While it's impossible to judge where Ethereum's price is headed right now, the cryptocurrency is still several thousand percent up from just six months ago, and its recent growth has been spurred by several successful initial coin offerings (ICOs), which are a way to fund projects by selling digital tokens on the Ethereum network to the crowds. These projects will eventually determine a big part of Ethereum's real value, and many of them are still in their infancy, so we'll probably see many more sudden rises and slumps before the price of Ether stabilizes.
In the meantime, many more ICOs are lined up for the near future, so some investors will likely regain a degree of enthusiasm for Ethereum soon, even if it's at a price much lower than Ethereum's all-time-highs.
Disclosure: The author of this text owns, or has recently owned, a number of cryptocurrencies, including BTC and ETH.