The Chinese government earlier today (Monday) banned the launch of any new cryptocurrencies or fundraising activities through ICOs (initial coin offerings). The directors of completed ICOs were instructed to return fund to contributors. It is unclear what is behind the crackdown, but such ICOs have been extremely popular in China in recent months, and it is speculated that the authorities are trying to cool the situation down.
Cryptocurrencies such as Bitcoin and Ethereum were already falling from recent highs, and despite claims to the contrary, the news from China has truly had little effect on prices since it was announced a few hours ago. Of course, it could be that news of the action leaked out in advance causing insiders to put shorts out. Bitcoin is down by more than 11% from its high of $4979.00 reached during weekend trading, while Ethereum has been hit much harder, down by more than 19% from its high of $395.00 which was reached last Friday. Ripple is down by more than 20% from its high of $0.2650 reached on Thursday.
It’s worth noting that retracements of these magnitudes are not uncommon developments in Cryptocurrency trading, and the situation is far from indicative that a crash or bubble-bursting situation is upon us. The retracement might have further to run, but it looks fully capable of bouncing back. Prices are not lower than they were just a few days ago: Bitcoin was at this price on Tuesday, Ethereum a week ago from last Thursday, and Ripple is back to where it was only one week ago. There will be a lot of spin about China, but this is just an excuse which is very unlikely to fundamentally affect what people are prepared to pay for the major cryptocurrencies in fiat currencies in the near term.