When September Ends – Chinese Reversal?

When September Ends – Chinese Reversal?

September was, as we all know, an interesting month to say the least for the Crypto eco-system.

At the beginning of September (Sep 2), Bitcoin began skirting the dizzying heights of $5000. That triggered what seemed to have been a disproportionate number of pre-programmed limit sells on the cryptocurrency which sent its price into a tail-spin.

Two days later (Sep 4), the Chinese government announced an official ban on ICOs. Once again, the crypto markets frantically went into panic-selling mode, and China followed up with more of the same with a crack-down on local Bitcoin exchanges (Sep 11).

If that wasn’t enough, the next day JPMorgan Chase’s Jamie Dimon then decided to get in on the act by declaring Bitcoin to be a fraud without inherent value. That was perhaps a slightly strange comment to make as Dimon himself should be aware, having a formal finance background, that the value of any asset can arise from human perception as much as anything else. Gold bullion – who production price is a mere 10% of its market price – is a case in point.

The end result was that, by September 12, the crypto-markets fell from a combined market capitalisation high of $172 bn on August 29 to $142 bn in the few hours that followed Dimon’s comments.

The game didn’t quite end there, though, as Korea, at the end of the month, then announced its own blanket ban on ICOs, citing legitimate concerns on the transparency of certain ICOs in operation today.


Confusion Sign

Market Indifference

The markets, however, did not react this time. Cryptos began to recover once more – as they seem to have a habit of doing – and Bitcoin was now registering a healthy $4200.

That initially created some confusion. A Korean follow-up ban on the back of a Chinese ban should, some had thought, have been the precursor of an Asian-wide domino effect and, perhaps, of a similar effect more globally.

What appeared to happen was, according to cryptocoinnews, precisely the opposite. The Japanese government formally approved licences for eleven new crypto-currency exchanges, and China  was registering concern that much of its crypto-currency activity was relocating to Hong Kong and into the blackmarket.

Chinese Pragmatism

We argued in our original article on the Chinese Bitcoin exchange ban that it was more likely to be associated with legitimate concerns relating to money-laundering as opposed to the Chinese government’s natural authoritarian demeanour in governance.

The give-away, we felt, was the low-key nature in which Local Bitcoin exchanges were being closed down. There were no formal announcements. The Chinese generally demonstrate pragmatism in economic matters, and it appears that the blanket ban on ICOs is simply serving as an intermission whilst they create a more rigorous regulatory framework for ICOs and the cryptocurrency markets more generally.

All Cold on the Western Front

Western governments, on the other hand, leaving aside cases of flagrant fraudulent activity, have been appearing generally indecisive on the question of ICOs. The ICO universe is missing a rigorous (but fair) regulatory system.

Neither Europe nor the United States seem to be taking a keen interest in the subject for the time being – and it appears that, ironically, some ICOs themselves are taking the initiative in relation to the current regulatory void.