## Abstract

I expect ethereum to experience downward pressure due to a lack of buyers, because of concerns over security, since the multisig hack.

## Multi Sig hack

I expect if you are reading this you know about the hack but just incase here's a reminder.  Yesterday on the 19th of july an exploit was found in the parity (1.5 and higher) multisig wallet contract code that allowed anyone to get the contract to declare them the owner.   A hacker drained [153,000 ETH](https://etherscan.io/address/0xb3764761e297d6f121e79c32a65829cd1ddb4d32) from multiply major ether holders, then a white hat hacker drained [377,000 ETH](https://etherscan.io/address/0x1dba1131000664b884a1ba238464159892252d3a) to preemptively take the funds before another hacker did.  I will assume that this whitehat hacker will return the funds, but there are some that believe they will not, but there are also some that believe the black hat will return those funds and they only took it as a way to highlight the error.

## The downside

The first reason I believe this hack will depress the price has already been seen, it is the fear and panic we will see around any hack, many will sell eth due to this fear and many others will sell due to the belief that others will sell, and thereby profit.   

Secondly we now have 30 mil + of ether that will likely be sold, while I have heard it said that $30mil is to small amount to effect an asset with $1 billion a day trading volume, I contend it is enough of a disruption to the finely balanced ecosystem that a market is.  Though I expect the effects to be only a few percentage over a few weeks and to be short lived.

My third reason is the most significant and I expect to the biggest influence on the market.  As in any economy, it is dominated by the 1%, in this case I am talking about people making 7 figure buys of ethereum.  If we assume that these rich 1% buy 90% of the new weekly ether (about $50 mil mined weekly), any disruption to this influx of new capital can have a massive effect on the price. 

These individuals that are investing $1,000,000 +  will likely be much more concerned with security than your average user investing less than $10,000.  Therefore this security scare will be particularly troubling to them and they will likely hold off future investments until an audit can be done on the type of wallet/contract they plan to hold their funds in.  While it is trivial to check if a contract has the same flaw that caused this hack it is likely that this scare will have large investors requesting further audits to find other vulnerabilities.  Waiting for these audits could cause reductions in investment for weeks or months, while the mining issuance will continue unabated.

My fourth reason is linked to the third, in that current large investors that use multisig wallets will be concerned about security and potentially some will recalculate their risk exposure and look to liquidate some of their holdings.  While large investors tend to be less skittish and do not liquidate their holdings lightly, they also tend to have strict risk exposure rules.

Fifthly, the upcoming bitcoin fork has been causing a lot of investors to divest from bitcoin in the face of concerns over the increased uncertainty around the fork.  Due to bitcoin's position as the dominant currency (for now) of crypto this pressure is being felt in all currencies and is likely to continue up to the 1st of august and for 1-2 weeks after.


## Is there an upside?

Firstly lets state that any or all the points above may be wrong and therefore there will be no downward pressure to counter.  Particularly if I am wrong about new investors being concerned about security.

Also all my points above are short lived downward pressure, the new investor waiting to buy in will still buy in, just not until they are assured of adequate security.  And the bitcoin investors that have divested in the face of the fork are likely not to of gone far, and can be expected to rebuy in the weeks following august 1st as their concerns are eased.

Aswell this expectation of buying pressure in the coming weeks will likely dampen the downward pressure we will see in the short term, as the price falls and the mid term upside is calculated those risk ratios will start to move to the buy side again.


## Summary 

Uncertainty and risk

https://cdn.pixabay.com/photo/2014/11/25/08/08/financial-crisis-544944_960_720.jpg
[source pixabay](https://pixabay.com/en/financial-crisis-stock-exchange-544944/)

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Warning: I am a random person online and you should not invest or divest money because of what I say.