The biggest event in the cryptocurrency world recently was the declaration of the Chinese authorities to shut down the exchanges which cryptocurrencies are traded. As a result, BTCChina, one of the largest bitcoin exchanges in China, said that it could be ceasing trading activities by the end of September. This news catalysed a sharp sell-off that left bitcoin (and other currencies such as for example Etherium) plummeting approximately 30% below the record highs that were reached earlier this month.
So, the cryptocurrency rollercoaster continues. With bitcoin having increases that surpass quadrupled values from December 2016 to September 2017, some analysts predict that it could cryptocurrencies can get over the recent falls. Josh Mahoney, market analyst at IG comments that cryptocurrencies’ “past experience tells us that [they] will probably brush these latest challenges aside”.
However, these sentiments don’t come without opposition. Mr Dimon, CEO of JPMorgan Chase, remarked that bitcoin “isn’t likely to work” and that it “is a fraud… worse than tulip bulbs (in reference to the Dutch ‘tulip mania’ of the 17th century, recognised as the world’s first speculative bubble)… which will blow up”. He would go to the extent of saying he would fire employees who have been stupid enough to trade in bitcoin.
Speculation aside, what is actually going on? Since China’s ICO ban, other world-leading economies are taking a fresh look into the way the cryptocurrency world should/ can be regulated in their regions. Rather than banning ICOs, other countries still recognise the technological great things about crypto-technology, and are looking into controlling the marketplace without completely stifling the growth of the currencies. The big issue for these economies would be to figure out how to do that, as the alternative nature of the cryptocurrencies don’t allow them to be classified under the policies of traditional investment assets.
Many of these countries include Japan, Singapore and the US. These economies seek to determine accounting standards for cryptocurrencies, mainly as a way to handle money laundering and fraud, which were rendered more elusive as a result of crypto-technology. Yet, most regulators do recognise that there appears to be no real benefit to completely banning cryptocurrencies because of the economic flows they carry along. Also, probably since it is practically impossible to turn off the crypto-world for as long as the internet exists. Regulators can only just focus on areas where they may be in a position to exercise some control, which seems to be where cryptocurrencies meet fiat currencies (i.e. the cryptocurrency exchanges).
While cryptocurrencies seem to come under more scrutiny as time progresses, such events do benefit some countries like Hong Kong. Because the Chinese ICO ban, many founders of cryptocurrency projects have already been driven from the mainland to the city. Aurelian Menant, CEO of Gatecoin, said that the company received “a high amount of inquiries from blockchain project founders based in the mainland” and that there has been an observable surge in the amount of Chinese clients registering on the platform.
Looking equipment , companies like Nvidia have expressed positivity from the event. They declare that this ICO ban is only going to fuel their GPU sales, because the ban will likely increase the demand for cryptocurrency-related GPUs. With the ban, the only way to obtain cryptocurrencies mined with GPUs is to mine them with computing power. As such, individuals seeking to obtain cryptocurrencies in China will have to obtain additional computing power, instead of making straight purchases via exchanges. Essentially, Nvidia’s sentiments is that this is not a downhill spiral for cryptocurrencies; actually, other industries will receive a boost as well.
In light of all commotion and debate surrounding cryptocurrencies, the integration of the technology in to the global economies appear to be materialising hastily. Whether or not you believe in the future of the technology, or believe that it is a “fraud… that will blow up”, the cryptocurrency rollercoaster is one worth your attention.