Bitcoin fell strongly on Friday after a report from a Chinese news outlet said China intends to close down local cryptocurrency exchanges, despite experts saying this was an impermanent mishap.
Sources near a cross-regulatory advisory group that supervises online financial activities disclosed to Chinese financial publication Caixin that experts intend to close key bitcoin trades in China. The news comes after China’s turn this week to boycott purported “initial coin offerings,” or the act of making and pitching advanced monetary forms or tokens to financial specialists to fund startup ventures.
ICOs permit new companies to raise investment by offering new cryptocurrencies, like bitcoin, as a byproduct of money. The People’s Bank of China says this trading, which is famous around the globe and especially in China, constitutes illicit 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. “We do not see this to be a lasting issue.”
While the prohibition on ICOs does not specifically influence bitcoin, the news generated negative market assumption, which is weighing on the costs of a few 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.
The move by China is not the first instance of the nation’s controllers endeavoring to take action against the cryptocurrency space. In January and February the national bank cautioned a few advanced cash trades they would be closed down on the off chance that they disregarded anti-money laundering rules. While bitcoin dropped on the news, its cost has been decreasing since hitting the $5,000 turning point at the end of the week. Strajnar said this current downward trend is likely due to some profit taking after reaching the $5,000 mark.