Tech & Science Bitcoin price drops $200 after new ruling from Chinese regulators

06:50  05 september  2017
06:50  05 september  2017 Source:   CNBC

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The price of bitcoin fell sharply after Chinese regulators announced a ban on organizations from raising funds using initial coin offerings (ICOs). ICOs allow start-ups to raise investment by selling new cryptocurrencies, which are similar to bitcoin , in return for cash.

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  Bitcoin price drops $200 after new ruling from Chinese regulators © Provided by CNBC The price of bitcoin fell sharply after Chinese regulators announced a ban on organizations from raising funds using initial coin offerings (ICOs).

ICOs allow start-ups to raise investment by selling new cryptocurrencies, which are similar to bitcoin, in return for cash. However, the People's Bank of China says this practice, which has become popular around the world as well as in China, constitutes illegal fundraising.

Despite bitcoin's price falling, some expect this move to be shortlived.

"This type of news is 'universally' negative sentiment, within the crypto space, so we are not surprised to see a dip on all assets today," Fran Strajnar, co-founder and CEO of data and research company Brave New Coin, told CNBC via email.

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"We do not see this to be a lasting issue."

While the ban on ICOs does not directly affect bitcoin, the news created negative market sentiment which is weighing on the prices of several virtual currencies, according to Charles Hayter, chief executive and founder of digital currency comparison website CryptoCompare.

"A rising tide lifts all boats but the opposite is also true - with generally bad news reverberating across the ecosystem all cryptos have turned red together," he told CNBC via email.

However, Hayter added that the long-term effects of regulation are positive.

"The wheat will be sorted from the chaff and a new gold standard of ICOs can be striven for," he said.

Bitcoin's price fell from $4,584 shortly before the announcement to around $4,350 per bitcoin. It was trading around the $4,429 level at midday London time on Monday, according to market data from Coindesk.

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The price of bitcoin fell sharply after Chinese regulators announced a ban on organizations from raising funds using initial coin offerings (ICOs). ICOs allow start-ups to raise investment by selling new cryptocurrencies, which are similar to bitcoin , in return for cash.

The bitcoin price has continued to drop , now sitting just above 0. Less than a week after a fake Chinese news report sent bitcoin and litecoin prices Having briefly topped the ,800 mark for the first time yesterday, bitcoin 's price has bounced back to achieve a new high of almost ,880 today.

The move by China is not the first time the country's regulators have attempted to crack down on the cryptocurrency space. In January and February, the central bank warned several digital currency exchanges they would be shut down if they violated anti-money laundering rules.

Furthermore, while bitcoin dropped sharply on the news, its price has been trending down since hitting the $5,000 milestone at the weekend. Strajnar said this recent climbdown is most likely just profit taking by investors.

"There is likely some profit taking since reaching almost $5,000 on bitcoin, but the amount of fresh capital that continues to pour in suggests this is not the start of a trend reversal."

Chinese bitcoin exchanges say awaiting clarification on closure reports .
China's largest bitcoin exchanges said on Monday they were still awaiting clarification from the government following more media reports that Beijing was planning to ban trading of virtual currencies on domestic exchanges. Spokeswomen for the OkCoin and Huobi platforms told Reuters they had no information to share following a report by Chinese financial publication Caixin that sent the price of bitcoin down 6.6 percent on Friday.Caixin reported that China was planning to shut down local crypto-currency exchanges.

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