This week we examine the major forces that keep the price of bitcoin locked within a certain range, take a closer look at the impact of government regulations on the Initial Coin Offering (ICO) market and discuss a few other implementations of blockchain technology in the public and private sectors.
Price Recovers After China Sell-Off
The recent BTC sell-off that started on September 1st seems to have been temporarily stalled, at least for now. The price of bitcoin, driven down nearly 18% after China’s announcement of a ban of all ICO-related activities within the country, seems to have been buoyed back up by the never-ending supply of newcomer Wall Street money, which refuses to let the price of BTC sink below $4,000. Bitcoin ended the week on a negative note, down 7%, in only the 4th such instance this year.
Though Chinese investors are still allowed to partake in ICOs conducted outside of the jurisdiction of the country, the ban is unlikely to be lifted before a massive overhaul in legislation can take place. Citing ICOs as a “threat to China’s financial market stability,” regulatory officials within the government are seeking to develop restrictions on domestic ICOs that would prevent the possibility of a cryptocurrency-based “bubble” or social chaos arising from devastating financial losses.
How big is the China ICO market? Of the estimated $1 billion in revenues generated by ICOs last year, China accounted for approximately 40%, or $400 million of that revenue. With ICO revenues topping $800 million globally in the first half of 2017 alone, it is easy to see where the direction of investment money is flowing. Even if the ban on ICOs in China is only temporary, it leaves many cryptocurrency investment enthusiasts at standstill of where to go next.
Hong Kong is also strongly considering the implementation of an ICO ban, motivated by chances that would-be ICO founders from China will seek new homes right across the border. For now, however, they have only issued a “cautionary statement” that warns cryptocurrency-based startup operations they may be subject to existing securities laws, which is in line with the SEC’s investor guidelines concerning ICOs as released in late July 2017.
International Bitcoin Clampdowns
The national governments of Dubai, Venezuela, Bolivia and Ecuador are among a handful worldwide that have banned the use of bitcoin in its entirety. Many of these countries’ citizens actively use bitcoin for a large variety of purposes — from escaping hyperinflation-induced poverty to buying luxury, high-rise apartments. For the most part, federal governments have had little success charging citizens with cryptocurrency related crimes in these countries, choosing instead to convict them under different charges based in pre-existing law.
Though Dubai had banned the use of all virtual currencies, they reversed course earlier this year, with a banking authority stating the ban did not apply to bitcoin. A technology firm operated in Dubai managed to skirt their country’s restrictions by offering an ICO for a “Sharia law-compliant” gold-backed token. Through their ICO period they managed to raise a little over $2 million, with the majority of tokens being unsold and available to institutional investors. An earlier sign of Dubai reversing course in their handling of bitcoin was the announcement that one of the country’s major financial institutions had announced plans of their partnership with the blockchain-based, bank-friendly Ripple platform. The remittance processor noted Ripple’s blazing fast network speeds and ability to resolve cross-border transactions with greater ease than traditional systems.
Bitcoin for the Rich?
One demographic of bitcoin users that isn’t being intimidated by shifting trends in society or government, one that isn’t deterred by the bitcoin network’s escalating transaction fees, is that of the wealthy, who still find bitcoin to be a cost-cutting utility when compared to available alternatives. Instead of having to pay a percentage of a fee to transfer money a great distance, the bitcoin network charges them a flat $3-$6 fee, regardless of the dollar worth of the bitcoin sent.
Bitcoin luxury markets are now a trend of rising popularity; not just because they are affordable to the rich but also because the general mainstream acceptance of bitcoin has crossed into their demographic as well (as best evidenced by the massive surge of Wall Street money and proclamations this year unlike any other). Whether its libertarian underpinnings or trend of increasing merchant adoption are sources of trust in bitcoin for the rich, cryptocurrency is becoming the toy of the wealthy, frequently falling out of touch with the poor masses who might better benefits from the advent of financial decentralization.
Also in the News
- Bitcoin is not the only coin impacted by recent government rulings against ICOs. The price of ETH also maintains a downward slide, perhaps because the ERC-20 (or Ethereum-compatible) token that fuels over half of all ICO programs is relatively easy to create. Part of the beauty of Ethereum is that it requires relatively little programming knowledge to create a custom “smart contract” that allows tokens to be automatically distributed according to the terms of the ICO. Despite its recent price drop, Ethereum maintains a 2000% gain over a one-year period.
- The Ukraine is now one of the first countries to have formally implemented blockchain-based solutions in the function of their government. As part of their agreement for a $40 billion bailout found from the IMF, Ukrainian authorities implemented their Ethereum-based program, a major part of the mandated state modernization campaign. They hope to curb corruption and waste through a more transparent form of recordkeeping and administration.
- Use case scenarios for implementing blockchain technology in the attempt to solve every day problems continue to cross into new fields of business. Shipping company Maersk announced plans last week to work with Microsoft in building a blockchain-based marine insurance platform. They hope to reduce costs associated with insurance transactions which can be seen as too tedious in the mammoth-size scales at which Maersk operates.
- Perhaps in response to Microsoft’s announcement of the development of their business-friendly, custom blockchain-generating Coco Framework, IBM recently unveiled plans to release a blockchain solution via cloud service to accelerate adoption among major corporations that heavily rely upon its software for business operations. The service will start at a cost of 50 cents per hour of usage and will be initially offered to retail titans Dole, Kroger, Nestlé, Tyson Foods and Walmart.