Cryptocurrency Hegde Funds are Shorting Ethereum, Cite Scaling Issues

Despite supporting thousands of cryptocurrencies on its open-source platform, institutional investors are seemingly bearish on the broader use case of Ethereum, the world 's second-largest digital currency by market cap.

According to Forbes, cryptocurrency hedge funds and family offices believe Ethereum will plummet further in 2018, despite the platform token already falling approximately 40% from its all-time high in December 2017.

New York-based Tetras Capital is relatively popular in cryptocurrency circles for its coin analyses, and price outlooks recently published a 41-page report explaining its ether short.

Sunnarborg acknowledges Ethereum's concept and overall application but believes the two factors are not enough to make it a good investment.

The entrepreneurs further voiced concerns of Ethereum's inflated $48 billion market, which, according to them, does little justice to the network's capacity of handling 15 transactions per second.

Scalability issues have unanimously plagued Ethereum and network congestion after the launch of applications on its platform, notably the December 2017 case of CryptoKitties, a tradable digital cat game which caused skyrocketing fees and hour-long delays for processing transactions on the network.

Tetras noted in its report that applications costs in the Ethereum network were "1 million" times more expensive than Amazon Web Services, a significant disadvantage for companies considering decentralized server systems.

The Ethereum network has several decentralized applications running on its protocol, attracting more than 5,000 active users daily.

"We are nowhere near a bear market yet, [and] demand for Ethereum-based tokens and applications is largely speculative. In the absence of more Enterprise Ethereum Alliance announcements in 2018, I won't look to add more exposure."

Ethereum developers are aware of the issues affecting their platform and are steadily working towards improved mechanisms.