On Monday China made it illegal to raise funds through Initial Coin Offerings (ICO’s). ICO’s have been used as an unregulated means of raising funds for new cryptocurrencies. ICO’s are similar to crowdfunding, however investors are drawn to buy the ICO’s in the hope that after the cryptocurrency is launched, their investment will rise. (For more information on ICO’s see https://en.wikipedia.org/wiki/Initial_coin_offering)

The ban by China means that funds are no longer allowed to be raised by ICO’s. China have even gone as far as demanding that individuals and organisations return money recently raised money through ICO’s. Over $2 Billion has been raised by ICO’s in 2017 alone.

 

How the news impacted Cryptocurrencies

Almost immediately all of the major Cryptocurrencies took a big hit! Bitcoin price has dropped over $600 and Ethereum has dropped around $50.

 

What will happen next?

As always with Cryptocurrencies it is difficult to predict what’s next in store. We await to see whether other countries will follow China in banning ICO’s and whether China will put regulations in place for future ICO’s or simply keep a flat-out ban.

The news has caused people to panic sell which has had a factor on the price dropping. We think that cryptocurrencies are likely to recover from this big drop. It is likely that Bitcoin will break past $5,000 in near future.

If you would like to read more on China’s ICO bank then Click here to see statement from the People’s Bank of China.

Stay tuned for more cryptocurrency news.

We are not investment or financial advisors and are here to provide news and our opinions. Please be fully informed regarding the risks and costs associated with trading the financial markets and the Cryptocurrency market, it is one of the riskiest investment forms possible.