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3 reasons behind a sell-off on Bitcoin. Is the rally over?

Summary:

  • The Chinese central bank calls initial coin offerings (ICOs) illegal 
  • China’s authorities order national digital exchanges to close causing a panic sell-off on Bitcoin
  • JP Morgan CEO Jamie Dimon foretells the end for cryptocurrencies 

Bitcoin has experienced an outstanding rally so far mainly on the back of growing acceptance among various countries. However, after the price achieved $5000 a more extended decline has begun. China is mostly to blame here but remarks from the CEO of JP Morgan added to declines. Is the Bitcoin bull market over?

China, being among top countries when it comes to interest in cryptocurrenies, dealt the first blow to Bitcoin as the Chinese central bank (PBoC) called Initial Coin Offerings (ICOs), the blockchain community’s version of crowdfunding, illegal. It said that growing interest of ICOs had put financial stability at risk. Furthermore, the PBoC also ensured that those who had already raised money throughout ICOs were obliged to provide refunds. It was the first step taken by the Chinese watchdog in order to clamp down on broadening usage of digital currencies. Therefore, it should not have been a surprise that the price of Bitcoin slumped immediately. But the main shock wave from China was yet to come. 

As Bloomberg reported on Friday, the Chinese regulators ordered the nation’s digital exchanges to close. Even as a knee-jerk reaction turned out to be less meaningful compared to that seen in case of the thread related to ICOs, it undoubtedly added fuel to the fire prompting yet more investors to reconsider their bets on Bitcoin. The news flow from China seems to suggest that broadening of usage of all kind of digital currencies might no longer be easy and it could reduce interest of the Chinese citizens who have been warned about risks related to cryptocurrencies. 

The latest and probably the most vocal story around Bitcoin comes from the US. Jamie Dimon, the CEO of JP Morgan Chase, voiced personal views which were not supportive for Bitcoin to say the least. He suggested that he would fire any employee trading Bitcoin for being “stupid” adding that the cryptocurrency "won’t end well" and forecasting that it would blow up eventually. Those comments were not sufficient though and Dimon moved even further calling digital currencies “a fraud” and “worse than tulip bulbs” recalling the mania that swept across Netherlands in the 17th century, where speculators drove up prices of tulip bulbs to exorbitant levels. The Bitcoin price collapsed below $4000 mark for the first time since August 22. However, Dimon added that there’s no telling how high the Bitcoin price could go before it collapses. 

Overall, Bitcoin seems to be driven by news on its acceptance or rejection in the first place. It surged to $5000 when we received very promising news from countries like Japan, Australia and Russia as it seemed to seal a positive future of this cryptocurrency. Now that the news flow has reversed the price of Bitcoin reacted very sharply as well. Traders need to watch out for new information carefully to determine the next move in prices.  

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Source: xStation5 

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