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Ethereum Slowdown Incites Tokens Decoupling

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Ethereum struggles with network congestion.

Things aren’t going quite well for the Ethereum platform currently. The Ethereum blockchain network is facing several performance issues. Moreover, the much-awaited Constantinople upgrade for Ethereum will no longer arrive as expected in early 2019.

ERC-20 Tokens Decoupling from Ethereum

Popular data analytics platform, Santiment, shows that the ERC-20 tokens earlier issued on the Ethereum blockchain, are now decoupling from it. These tokens are now creating their own platforms and communities. As a result, their price no longer reflects the price of Ethreum’s native token Ether (ETH).

The Santiment data shows that nearly 10 ERC-20 tokens are decoupling from Ethereum. Two of these 10 have made its way to the world’s largest cryptocurrency exchange (by trading volumes), Coinbase.

Three Major ERC-20 Tokens Decoupling from Ethereum

To present its study with the right examples, Santiment considers three ERC-20 tokens decoupling from Ethereum. These include 0x (ZRX), Maker (MKR), and the Basic Attention Token (BAT). The report shows that these three tokens are reflecting independent price movements. Thus, their price reflections no more follow ETH’s price.

  • ZRX price took the upswing last month when Coinbase Pro announced to list the crypto token on its platform. According to its whitepaper, the 0x protocol of the cryptocurrency “facilitates low friction peer-to-peer exchange of ERC20 tokens on the Ethereum blockchain.” ZRX forms the foundation of decentralized cryptocurrency exchange Paradex, which recently merged into Coinbase’s trading platform.
  • The Maker (MKR) token is gaining a huge popularity due to its successful product launch of DAI stablecoin. The DAI stablecoin is widely popular and also the de-facto crypto token for decentralized exchanges. The stablecoin is pegged to the USD with its marketcap on a gradual growth trajectory.
  • Along with ZRX, the Basic Attention Token (BAT) is also making its way to the Coinbase Pro trading platform. This news has put the cryptocurrency token on an upward trajectory. Furthermore, the BAT price started surging last month when the Brave browser announced a Chromium-based version of the software which is 22% faster than the previous version.

The Weight of ERC-20 Tokens in the Ethereum Network

The Santiment report shows that the ERC-20 tokens still contribute 60% of the overall Ethereum market cap. However, the report also mentions that these crypto networks “are done waiting for ETH to bounce back: they’re paving their own bull run.

Although the ERC-20 decoupling from ETH is a sign of worry, it doesn’t mean the network is falling behind. Santiment report adds,

“Logically, this price movement should eventually find its way to ETH as well. A similar pattern happened in 2016-2017 when ETH launched the explosive bull run and BTC followed. But the market is irrational enough that we prefer to stay in the present moment. And at this moment… the price dynamics of some tokens are now decoupled.”

Risk Disclosure

This article should not be taken as, and is not intended to provide, investment advice. Users are ultimately responsible for the investment decisions he/she/it makes based on this information. It is your responsibility to review, analyze and verify any content/information before relying on them. Trading is a highly risky activity. Do consult your financial adviser before making any decision. Please conduct your thorough research before investing in any cryptocurrency and read our full disclaimer.

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