September has been one of the worst months for Bitcoin in 2017. The digital token is down 21.4% in the first two weeks. It’s even dropped below the US$4,000 mark, which it passed in August this year. Has bitcoin’s rapid appreciation finally come to an end?
Bitcoin’s Stalling Growth Due to Lack of Buyers
Bitcoin’s stalling growth, in my mind, is due to a lack of buyers. The reason why bitcoin has been able to climb so high year-to-date is because buyers were plentiful. The only sellers in the market were bitcoin miners. And even they were hesitant to depart with their rapidly appreciating coins.
However, with negative sentiment surrounding cryptos, new potential buyers have suddenly been scared off.
China’s ICO Ban Still Fresh
China’s initial coin offering (ICO) ban is still fresh in investors’ minds. Reported by Reuters:
‘China is cracking down on fundraising through launches of token-based digital currencies, targeting ICOs in a market that has ballooned this year in what has been a bonanza for digital currency entrepreneurs.
‘The boom has fuelled a jump in the value of cryptocurrencies, but raised fears of a potential bubble.’
While China says they’re trying to limit fraud and scams, it’s also in China’s interest that money doesn’t flow out of their yuan and into cryptos. The government has spent enormous sums of money to prop up their currency. Why would they then let citizens sell down the yuan for digital coins?
Just after China’s ban, JPMorgan Chase & Co. [NYSE:JPM] chief Jamie Dimon said: ‘You can’t have a business where people can invent a currency out of thin air and think that people who are buying it are really smart.’
But surely it’s in Dimon’s interest that bitcoin doesn’t succeed. Bitcoin was created to remove the need for big banks and financial intermediaries like JPMorgan.
However, I would agree with sceptics that bitcoin is extremely hard to value. What price would you place on the crypto? And what would be the reason for that price?
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Junior Analyst, Money Morning