As cryptos shed tens of billions of dollars in value this weekend, news of an ICO crackdown in China fails to inspire confidence.
Easily gained, easily lost. That’s what it feels like to track the world of cryptocurrencies lately, where steep spikes and gullies can add or subtract billions of dollars of value from the crypto market in a matter of hours.
This weekend was no exception. Sharp corrections in the value of the largest cryptocurrencies lowered their collective worth to around $143 billion as of the time of writing. That figure nearly reached $180 billion on Saturday.
In just the last 24 hours, Bitcoin is off 6 percent to $4,223, Ethereum is off 15 percent to $286, and Bitcoin Cash, Litecoin, and Ripple each are off double-digit percentages, according to CoinMarketCap.
That’s a lot of carnage, but the gains currently being erased were built in a recent, massive rally. So, the pain only goes so far.
Here’s the market cap chart for all cryptocurrencies that CoinMarketCap tracks since the start of the year, inclusive of the recent correction:
Helping fuel the most-recent declines could be news out of China that the local government is taking an even stricter line against initial coin offerings, or ICOs. These token pre-sales have attracted huge amounts of hype, titanic sums of capital, and rising levels of government interest both domestically and abroad.
Regarding the recent Chinese news, here’s CNBC:
Seven government administrations […] issued a joint statement where they reiterated that ICOs are unauthorized illegal fund raising activity.
The statement said authorities are banning all organizations and individuals from raising funds through ICO activities and that all banks and financial institutions should not do any business related to ICO trading.
That can’t help short- and medium-term demand for liquid cryptos like Bitcoin and Ethereum. So, down go their prices.
As a final note, something that I try to keep in mind: Bitcoin’s amazing percentage run from zero to a few thousand dollars has been staggering. But, to repeat the feat, each time bitcoin wants to double, the sum of new value it has to
prove imply now doubles into the Very Material Realm. Bitcoin’s aggregate value of around $70 billion is worth about the same as Uber. For Bitcoin to double, it has to generate another Uber’s worth of value. That is much harder to do than back when Bitcoin was worth, say, $50 million instead.
So, the prior success of Bitcoin will likely slow down its pace of growth, on a percentage basis. Notably, the same idea works in reverse for nascent ICO-dervied tokens.
Read the full article on CrunchBase here.