Dramatic events unfolded in the cryptocurrency world yesterday. China put a blanket ban on initial coin offerings (ICOs).
As reported by Bloomberg:
‘China has sidestepped an issue plaguing regulators worldwide: are such tokens securities?
‘A cross between crowdfunding and an initial public offering, ICOs — which have raised at least $1.25 billion globally so far — are the sale of tokens based on the blockchain, the technology underlying bitcoin. While they at least ostensibly promise the holder access to the final product, making them more like vouchers, the problem for regulators is they also often bear the characteristics of regulated securities, especially when buyers are betting on capital gains.’
You can almost understand why China would ban ICOs. On more than one occasion ICOs have been used by scammers who wanted to raise capital. When asked how he views the ICO market right now, Blockstream CEO Austin Hill said:
‘It’s like the dotcom bubble all over again. An absolute clusterf*** of illegal, immoral, straight-out scams occurring on a grand scale. It seems to continue.’
Of course China has other reasons to ban ICOs. For one, they probably don’t want a bunch of capital running out of yuan and into cryptos, devaluating their currency.
Bitcoin Price Drops
As word of the ban got out, cryptos like bitcoin, ethereum and bitcoin cash had their biggest losses in months. Bitcoin in particular dropped more than US$900.
But as Bloomberg tech columnist Tim Culpan points out, ‘Bitcoin’s still cool’.
‘It’ll all be fine. If anything, you should worry about ether, because that’s the currency that underpins most initial coin offerings. But even then, don’t sweat it.
‘Bitcoin is still going to overthrow the system. Get rid of all those central banks. Do away with fiat currencies. They’re already dead men walking, anyway. It’s just a matter of time. Ether’s ethereum technology is going to revolutionize smart contracts and do away with banks, and lawyers and all those bloodsuckers who just wanna steal our money and line their own pockets.’
And I’d have to agree with Culpan, even if he is being sarcastic. There’s now so much money poured into cryptocurrencies, it will be unlikely that everyone will simply give up on their investments.
In the past few days we’ve started to finally see sellers, other than bitcoin miners, in the market. However, just like the stock market, fears will subside and bargain buyers will come into the market.
As Culpan writes:
‘So what if bitcoin is down 15 percent in the last two days. Ethereum dropped 20 percent in a day, IOTA and NEO are down more than 30 percent in the past 24 hours. Let ‘em fall, man. Another 30 percent, another 50 percent. Let it go all the way to the bottom, we’ll just buy up more. The lower they go, the more we’re gonna buy. Fundamentals don’t matter, this is the future. Don’t you see?’
Junior Analyst, Money Morning
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