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Bitcoin, Ethereum, and Other Cryptocurrencies Tumble after China Bans ICO’s

By:
Colin First
Updated: Sep 4, 2017, 14:28 UTC

Rumors have been abuzz over the last few days and in fact, many traders now say that this was probably the reason for the fall in the BTC and ETH prices

Bitcoin Friday

Rumors have been abuzz over the last few days and in fact, many traders now say that this was probably the reason for the fall in the BTC and ETH prices over the weekend, but it is confirmed now that the People’s Bank of China and the regulatory authorities have banned the raising of funds via ICOs. All types of ICOs have been banned and the people have been strictly told not to launch any further ICOs or invest in them anymore.

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ICOs Prone to Misuse

It had been a period of bonanza for the people behind the ICOs over the last few months as we have had many ICOs being launched, some genuine and some not very much so, as a way of collecting funds. Some of these ICOs did well and managed to reap good rewards for those who invested in them while others went bust while still others were used as vehicles to push money outside the country violating the AML rules.

This regulation would stop the misuse of ICOs and it is widely believed that this could be one of the first steps to clean up the system before introducing it back again in a clean, slow and controlled manner. The exchanges and the trading platforms that have been used to launch several ICOs have been instructed not to continue such a service anymore and the regulators have been instructed to inspect these platforms and report on them.

More importantly, the funds that have been collected by the various individuals and businesses in the forms of ICOs are required to be returned to the investors, as per the new regulation. This could lead to a bit of chaos in the markets as it is difficult to trace all such funds now and it would be more difficult to bring all those funds back. How the authorities and the people behind the ICOs are going to manage this situation remains to be seen.

Market Likely to be Volatile

Also, with this ruling and with a large number of investors from China investing heavily in ICOs, within and outside China over the last few months, the cryptocurrency market is likely to get affected a lot as they might be rushing in to convert their holdings into cash before the regulators sweep in. This could lead to a large sell off in these markets and it will be a challenge for the market to handle such a situation. The short term price movements in the BTC and ETH markets would be interesting to watch.

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About the Author

Colin specializes in developing trading strategies and analyze financial instruments both technically and fundamentally. Colin holds a Bachelor of Engineering From Milwaukee University.

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