Bitcoin and Ethereum are cratering

By 15th September 2017All, Blockchain, Cryptocurrency

Bitcoin and Ethereum are cratering

Enlarge / The price of Bitcoin has fallen 40 percent since the start of September.

In recent months, hundreds of projects have introduced new cryptocurrencies that compete with Bitcoin and Ethereum or use the concepts they pioneered to tackle other problems like file storage. Most ICOs were conducted in Bitcoin or ether, and a number have been for coins built directly on the Ethereum platform. Accordingly, the ICO boom pumped up the price of Bitcoin and Ethereum.

Explaining market movements is never an exact science, but one likely factor driving the current crash was an announcement last week that the Chinese government was banning initial coin offerings (ICOs). This week, it became clear just how broad the Chinese crackdown was, as the government announced that Bitcoin exchanges in China would need to shut down. China had become a major market for Bitcoin, so a government crackdown there can be expected to have a big impact on its price.

The China news came at the same time many people were worried that the ICO boom had become an unsustainable bubble. ICOs kept breaking records this year, with an Ethereum compeitor called Tezos raising $232 million in July. In recent weeks, celebrities like Paris Hilton and Floyd Mayweather have endorsed cryptocurrency offerings.

Yet in many cases, the technologies underlying these coin offerings hadn’t even been built yet, and their regulatory status remained uncertain in the United States and in many other countries. Once people started to doubt whether the boom could be sustained, psychology reversed itself, and people started stampeding for the exits.

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