NEW YORK – Despite a crackdown on the cryptocurrency market by major financial regulators around the world this week, the market for digital coins is rallying Wednesday with newbie bitcoin cash among those leading the pack.
Bitcoin cash, the clone currency of bitcoin, is up over 18% at $US651 per coin. Meanwhile, the rest of the top 10 largest cryptocurrencies by market cap are trading higher Wednesday. Bitcoin, for instance, is up 4.7% at $US4,651 per coin.
The cryptocurrency market was sent into a tailspin Monday after financial regulators from South Korea and China cracked down on initial coin offerings, the red-hot cryptocurrency-based fundraising method. China declared ICOs illegal on Monday and South Korea pledged to “strengthen levels of punishments” for companies looking to raise capital via an ICO. Nearly every single digital currency was down in the aftermath of the news. In total, the market cap of the entire cryptocurrency marketcap declined a whopping 20%.
On Tuesday, Hong Kong’s regulators also suggested ICOs would fall under securities law.
The market for ICOs has grown exponentially in 2017 with more than $US1.8 billion having been raised via the method, according to an email from financial technology analytics provider Autonomous NEXT. In the second quarter of the year, ICOs raised three times as much money as venture capital firms, according to CoinDesk’s “State of Blockchain” report.
To raise cash through an ICO, a company issues a new digital currency that can either be spent within its ecosystem, a bit like Disneyland dollars, or used to power part of the business.
Sebastian Quinn-Watson of Blockchain Global, a bitcoin exchange operator, told Business Insider in an email Monday morning that the legal crackdown on ICOs is “absolute win” for the cryptocurrency community because it will weed out illegitimate ICOs.
“The changes in regulation will take a lot of the bad actors out quickly,” Quinn-Watson said. “Excellent result for every founder who has a good product, a sensible and well structure token sale process, and an international outlook.”
Cryptocurrency investors appear to agree with Quinn-Watson’s thesis. The market has recovered over $US20 billion in marketcap since Monday’s bottom.
Ethereum, the blockchain on which most ICOs are powered, is also rallying alongside bitcoin and bitcoin cash. It’s up 5.4% since Tuesday at $US337 per token.
Litecoin, which surpassed $US90 last week before tanking well below $US70 on Monday, is on track to recoup its losses. It is higher by 7.9% at $US79 per coin.
Wild price swings are not atypical in the cryptocurrency world. As such, Monday’s price massacre will likely not be the last.
Greg Dwyer of BitMEX, a bitcoin mercantile exchange, remembers bitcoin’s early days when 30% drops were part and parcel with trading the digital coin.
To newcomers not accustomed to such volatility, he says “welcome to crypto-trading.”
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