Ethereum Classic (ETC) has gone through a tough time for the last few weeks. The recent slide in value has been driven by the ETCDEV team’s announcement that they were closing shop due to lack of funding. On most social media forums, talk of Ethereum Classic (ETC) being dead is rife.
This makes the idea of going short on Ethereum Classic (ETC) quite enticing for investors. After all, if it’s a dead project, then short selling it at its current price looks like a very profitable opportunity, with zero as the target. However, going short on Ethereum Classic (ETC) at its current price could actually be very risky, for investors.
Firstly, Ethereum Classic (ETC)’s price action after the announcement by ETCDEV has proven that Bitcoin is the market’s price mover and not fundamentals. In a more rational and efficient market, Ethereum Classic (ETC) would have taken a major hit relative to the rest of the market after the ETCDEV announcement. However, it has continued to move up and down with Bitcoin (BTC), just like the rest of the market.
In essence, short selling Ethereum Classic (ETC) would be tantamount to going short on Bitcoin (BTC), and that’s risky at this point. That’s because Bitcoin is trading at a critical support level. For the past few weeks, Bitcoin (BTC) has been trading above the critical 200-day MA. A look at its history, it is clear that Bitcoin (BTC) has never broken below the long-term 200-day MA in any bear market. This means that it could be at the bottom, and could a see bounce off the $3100 – $3600 level in a new Bull Run.
This would lead to a reversal of all the other altcoins, including Ethereum Classic (ETC). This makes going short on Ethereum Classic (ETC) at current prices a risky move. If the market rebounds, and it can always happen suddenly, anyone going short on it could get rekkt. It doesn’t matter what coin they are holding
Secondly, the death of ETCDEV doesn’t equate to the death of Ethereum Classic (ETC). This is a decentralized crypto that is largely community driven. It also has a host of other teams working on it, including the IOHK. This means that development on ETC is going on as normal. Already there are Dapps running on ETC and many more are in the pipeline going into 2019, thanks to ETC Labs. A growing number of Dapps on the ETC blockchain could give it support, and also give it a boost, in case the entire market turns bullish.
With all these factors at play, there is no doubt that going short Ethereum Classic (ETC) on the belief that it is dead could turn out to be a risky move. The market right now is at a point of major uncertainty, where anything can happen. The best time to go short was at $7 when Bitcoin also broke below $5k. Right now, the risk-reward potential may not be the best. However, if Bitcoin breaks support at $3000, then there would be a reasonable reward in going short on ETC.