By
Bhushan Akolkar
April 19th, 2024
Bitcoin drops under $4000 after its historical maximum of $5000 reached few days ago, following the decision of The People’s Bank of China to ban ICOs.
The bitcoin price fell to its lowest total since August 22 at 02:09 UTC September 5, making $3998 according to the data from CoinMarketCap. This comes shortly after the token achieved another historic record on Friday, September 1, being traded at $4975. The spike, in turn, has pushed the market cap of all virtual currencies to rise above $175 billion. On some exchanges, the price of bitcoin has been even higher, surpassing $5,000 mark.
The drop might have been resulted from the new ruling of The People’s Bank of China (PBoC), in the framework of which it bans all domestic initial coin offerings (ICOs) declaring them illegal, and obliges any individuals or organisations that have completed ICO fundraising return the funds.
This move follows the U.S. Securities and Exchange Commission (SEC) investor alert, which among other things contains some tips which investors should borrow in mind to secure themselves against possible scams. To recap, in late July, the SEC also published a report reminding investors the necessity to register offers and sales of distributed ledger or blockchain technology-based securities and stating that ICOs may be subject to U.S. Securities Laws.
Apart from conducting ICOs, digital token financing and trading platforms are deprived if the right to do conversions of coins with fiat currencies. Correspondingly, digital tokens can’t be used as currency on the market and banks are forbidden to take part in, or contribute to initial coin offerings’ activities.
Apparent tricky nature of ICO activities, which on the one hand are becoming more and more popular among developers, businesses, and individual investors providing both fair and lawful investment opportunities, and on the other serve as a breeding ground for various forms of scams, made Chinese government secure its domestic economy by making such a decision.
Widely seen as a way to sidestep venture capital funds and investment banks, ICOs may be used for frauds, which often include market manipulation or “pump-and-dump” schemes carried out by publicly traded companies that claim to develop and launch some new technologies. The large amount of money collected so quickly during ICOs also attracts cyber criminals which prerequisites frequent emergence of such scams as phishing, for example.
However, some experts think that China will eventually allow ICOs, but only on approved platforms and in approved formats, checking the projects individually. One more positive sign for possible ICO return is that a number of central banks around the workd, including that of China, continue to explore the viability of issuing their own digital currencies even in a current situation.
The bitcoin’s downturn comes at a time when the total market cap of all publicly issued cryptocurrencies sees a similar decline, dropping from a high of more than $179 billion to $145 billion today, according to the CoinMarketCap Index.