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The ethereum (ETH) price has crumbled

Last week the Oracle of Omaha, Warren Buffett, told CNBC that he felt that cryptocurrencies would almost certainly “come to a bad ending”.

Well this week the legendary investor is certainly living up to his oracle tag. Overnight bitcoin and the rest of the cryptocurrencies sank deep into the red.

One of the hardest hit was the ethereum (ETH) price. Although it has recovered slightly now, at one stage the ETH price had fallen as low as US$891 per coin.

That was a 32.5% decline in the space of 24 hours, reducing its market capitalisation to US$86.4 billion. At the time of writing the ETH price has rebounded to US$998 per coin according to Coin Market Cap.

What is ethereum or ETH?

Ethereum, or ETC, is the second largest cryptocurrency based on market capitalisation. It briefly dropped down to third earlier this month after Ripple’s XRP overtook it, but now sits comfortably in second position again after the latter’s significant fall over the last seven days.

The currency has been growing in popularity over the last 12 months due largely to the potential of the Ethereum blockchain.

In essence, the technology is a computer network that allows developers to build and run decentralized applications on it. It has been designed as a way to improve things such as financial transactions and personal information storage.

Why has it sunk lower today?

All of the top 20 cryptocurrencies have suffered heavy declines overnight amid fears of government crackdowns in China and South Korea.

South Korean officials have warned that they may shut down local exchanges and Chinese officials may go one step further by blocking access to both domestic and international platforms.

As these two nations provide a significant amount of trading volume, I suspect that there could be some panic selling going on which is weighing heavily on prices.

And while prices have started to rebound again now, I would suggest investors stay clear of cryptocurrencies for the time being whilst regulators work out their next moves.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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