China saves Bitcoin: But this was not the Plan
China is fighting with all its power against cyber currencies because more and more Chinese are spending their money abroad. But ultimately, China’s blocking of ICOs is a blessing for Bitcoin and Co.
Investing in digital money has long been no secret among Internet freaks. Even It-Girl Paris Hilton was happy on Sunday to participate in a so-called Initial Coin Offering (ICO). She invests in a new cyber currency.
With an ICO, companies like to generate fresh capital – ultimately not much different than with a stock exchange. They create a new digital art currency, the investors buy it – usually with Bitcoin – and receive for their investment instead of shares so-called tokens.
What began as a political statement, because digital money like Bitcoin grow and thrive unregulated by central banks, now offers a growing client different possibilities for lucrative investments. Direct investments in the large Cryptocurrencies, which include Ethereum and Dash, arenow extending all conventional money investments into equities, gold or real estate bylengths. The hype is unmistakable. A Bitcoin now costs over 4000 euros. It was a fool that immediately after the announcement of the American party girls the courses of digital currencies crashed up to 20 per cent. With Paris Hilton or all the others, who are now looking for their luck in cryptic diseases, this burglary had nothing to do with. Not the speculators made the courses, but the Chinese financial supervision. They had just forbidden ICOs, which the Hilton heiress wanted to invest.
„ICOs are a kind of illegal public funding related to criminal activities such as fraud and snowballing,“ the Central Bank justified its ban.
The government fights against ICOs mainly for political reasons. Due to the economic slowdown, the high debt of companies and the danger of an overheating of the real estate market, more and more Chinese are making their money abroad. Digital currencies are an increasingly popular escape vehicle, a perfect loophole to avoid strict capitalcontrols. The People’s Republic has therefore become a high-rise of the crypt trade: in China, up to 98 percent of all bitcoin transactions are currently being processed. Although the lack of regulation has not only been the responsibility of the Chinese supervisory authorities, the US financial supervision SEC also recently questioned the legality of ICOs. However, there have been no consequences so far.
Consequences in the real world
Rainer Böhme: I don’t see an end of the hypes around Bitcoin and Co. The market for cryptic growth is volatilous, but ICOs are not the only factor that determines the value of Bitcoin. Demand is generally important. One can not explain the growth to 100 percent, says Böhme.
Cryptocurrencies are on the rise! The value of all digital currencies raised up in August against the previous month by 79 billion dollars, which is an increase of 84 percent. Anyone who still thinks that Cryptocurrencies are exclusively for freaks are deceived. They don’t lead a niche on the Internet anymore, but have left the digital world long ago. If the crypto-bubble does not exist anymore, this will have consequences in the real economy. The chip maker AMD is pleased with the increased demand for fast processors from the cyber gamers over bubbly sales. The same applies to companies like AMD or Nvidia, which employ thousands of people. This is why the financial supervisors are becoming increasingly active in many countries. If China protested forbidden for political reasons, this does not make the digitalmoney mad, but even strengthens the confidence of the investors.
What we think: Bitcoin recovered on Wednesday over eight percent of the price decline. The small, new brother Bitcoin Cash was even more than nine percent. Not only Paris Hilton will thank China for it. This was not the plan. What do you think about the decision to block ICOs?
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