Trust or No Trust, Traders Are Still Unsure About Ethereum Classic

Charles Bovaird
Jan 24, 2017 at 13:32 UTC
Updated May 19, 2017 at 19:34 UTC
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The possible creation of a new investment vehicle is bringing wider attention to the lesser-known digital currency, ether classic.

Teased as a forthcoming offering from Digital Currency Group (DCG) subsidiary Grayscale Investments, the investment vehicle (tentatively named the Ethereum (ETC) Investment Trust) would be a first-of-its-kind product offering exposure to the blockchain-based asset.

Started as a controversial offshoot of ethereum, a blockchain platform for applications launched in 2014, ethereum classic has strived for legitimacy since it was created last summer, often in the face of criticisms that it lacks the promise of its originating project.

In interview, however, analysts suggested that the possible creation of the vehicle, if achieved, would provide investors more means of gaining exposure to ether classic, in turn bolstering demand and placing upward pressure on prices.

Petar Zivkovski, COO of leveraged trading firm Whaleclub, for instance, argued that the potential filing would “without a doubt” bolster the digital currency’s standing if approved.

Zivkovski told CoinDesk:

“A large part of price suppression for any cryptocurrency is the lack of legitimacy and a lack of ‘mainstream’ access, eg: investing through traditional investment instruments. DCG’s Trust would provide both.”

However, among traders, Zivkovski emerged as a minority opinion on the issue.

‘Much to prove’

Although ether classic has experienced recent price gains, some market analysts have warned that they could be short-lived.

Arthur Hayes, co-founder and CEO of leveraged bitcoin trading platform BitMEX, stated that the fund may have a hard time generating enough assets under management (AUM) to have a lasting impact on price.

“This appears to be a classic case of ‘buy the rumour, sell the news’,” he told CoinDesk. “Future price appreciation is a function of the ability of the trust to market the fund. Unless the AUM increases dramatically in the short term, the price will fade from these levels.”

Tim Enneking, chairman of cryptocurrency hedge fund EAM, also provided a cautionary note, while noting it is a “serious attempt” to bolster the currency.

Other long-time detractors, like algorithmic trader Jacob Eliosoff, stressed that ethereum classic still has much to prove, given that the majority of ethereum’s original developers are still working on the ethereum blockchain.

He further asserted that the investment trust would do little to boost market fundamentals, asserting that trading is being bolstered by a few large holders.

He added:

“Whales can defend a price floor, but long-term success will require organic growth among developers and users. So far, this seems almost completely absent.”

Bullish market

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Still, with the news, ether classic seems to also be retaining the momentum it has been enjoying since late last week when the trust was announced.

Overall, the digital currency’s price traded between $1.37 and $1.40 yesterday, CoinMarketCap figures reveal, retaining the sharp gains it enjoyed with the news on 20th January.

That day, ether classic surged more than 20% from $1.16 to $1.40, before notching further gains over the weekend. It reached a high of $1.46 on Sunday, according to CoinMarketCap.

Prices have since pulled back from that level somewhat, but this modest decline is actually a positive sign, according to Zivkovski.

“The subsequent pullback was purely speculative as we see it, with profit takers capitalizing on the quick rise, but failing to bring price down meaningfully,” he said, adding:

“That’s a bullish sign for the weeks and months ahead.”

Disclosure: Grayscale Investments is a subsidiary of Digital Currency Group, CoinDesk’s parent company. 

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