What exactly is Ethereum and why is it going down in value? We explain what you need to know.
But first, a word of warning: buying cryptocurrencies as well as stocks and shares is a very risky business.
Investing is not a guaranteed way to make money, so make sure you know the risks and can afford to lose the cash.
Cryptocurrencies are highly volatile, so your cash can go down as well as up in the blink of an eye – you can lose all the money you put in.
So while Ethereum and other cryptocurrencies have been rising this year, they can easily tumble – as we have seen.
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Ethereum is trading at $2,573.92 at the time of writing on Friday morning, according to coinmarketcap.
That’s down around 5% in the last 24 hours and around 3% over the past week.
Ethereum hit an all time high of $4,362.95 on May 12, but the cryptocurrency has now fallen by around 40% since then.
What is Ethereum?
Ethereum is a cryptocurrency that was released in 2015. It’s the second largest after Bitcoin.
In fact, some experts believe it has the potential to one day overtake Bitcoin as the dominant coin in the market.
It was founded by eight people, one of which is 27-year-old cryptocurrency “celebrity” Vitalik Buterin.
He recently became the world’s youngest crypto billionaire as Ethereum soared in value.
Ethereum is also a ledger technology – using “blockchain”, like Bitcoin – that companies are using to build new programs.
A blockchain is where encrypted data can be transferred securely, making it nearly impossible to duplicate or counterfeit.
This ledger is the foundation of any cryptocurrency transaction.
The cryptocurrency allows people to trade currency or assets digitally outside of any government or bank.
Why is it going down?
Ethereum has rocketed in value over the course of this year.
It hit an all time high on May 12 after a wave of interest across crypto which pushed up many digital coin prices this year.
The surge to a record high of $4,362.95 meant ethereum rocketed by more than 2,000% since last year.
The price of Ethereum is currently $2,573.92 at the time of writing on Friday morning, according to coinmarketcap.
Cryptocurrencies across the board crashed last week after a crackdown by China was announced and billionaire entrepreneur Elon Musk raised concerns over the environmental impact of Bitcoin mining.
The plunge follows a startling rise for Ethereum as investors bet that ether will be of increasing use in a decentralised future financial system.
James Quinn, managing director at Q9 Capital, a Hong Kong cryptocurrency private wealth manager, said Ethereum’s rise over the year was also down to a number of other factors.
These include improvements made to the ethereum blockchain, and a growing shift towards “DeFi”, or decentralised finance, which refers to transactions outside traditional banking for which the ethereum blockchain is a crucial platform.
This article originally appeared on The Sun and was reproduced with permission.