The beginning of the week brought another reminder that cryptocurrencies may be vulnerable to market manipulation—and may not be ready for prime time.

False rumors of the death of Vitalik Buterin, the co-founder and public face of Ethereum, spread through social media on Sunday night, sparking a panic sell-off of ether, the network's digital token. In short order, $4 billion had been erased from the market capitalization of the world's second-biggest cryptocurrency.

The hoax originated on the online image board 4chan, long famous as a haven for trolls and pranksters. It capped off a week that had seen the price of ether tank once already, plummeting almost instantly to 10 cents on a major exchange in a so-called flash crash, before rebounding above $300.

To vanquish the hoax and stop the bleeding, Buterin himself took to Twitter on Sunday night to provide proof of life.

That appeared at first to have stopped the bleeding. But the price began falling again on heavy trading through Monday morning, and by late afternoon the cryptocurrency's market cap was $22.5 billion, down from a high two weeks earlier of more than $37 billion.

Banks have been showing signs of enthusiasm for digital currencies and the public, open-source blockchain networks they run on in recent weeks.

In May, the Ethereum Enterprise Alliance—a collective aiming to use the network's technology to build applications for Fortune 500 companies—added 86 new members to its ranks, including State Street, Rabobank and Toyota. A study from Cognizant released in June found that 86% of executives at financial services firms believe that public blockchains such as bitcoin's and Ethereum's would gain greater prominence in the next five years. That was slightly more than the 80% who said the same about private ledger systems. (The group's website does say it plans to make "privacy and performance improvements" to Ethereum's technology to get it ready for enterprise use.)

Investors also appear to be growing more bullish, after a period in which their focus had largely shifted to private blockchains. Blockchain, a startup that offers one of the world's most popular bitcoin wallets, raised $40 million last week in a Series B round.

Enterprise versions of Ethereum are typically decoupled from the cryptocurrency. JPMorgan Chase's Quorum, a smart-contract platform, is designed to be a private network for banks, for example.

But the ether flash crash and subsequent hoax show that financial institutions may have reason to be wary. Even if they aren't actually exposed to the volatility of such assets, being associated with technologies that aren't yet ready for prime time could incur reputational risk or bring extra scrutiny from regulators.

By late Monday afternoon, the price of ether was about $253, according to CoinMarketCap, having lost more than 15% of its value in 24 hours. It was trading at about $10 at the beginning of 2017.

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