On September 5, bitcoin price nearly dipped below the $4,000 region. The price of Ether, the native currency of Ethereum, also struggled to sustain its value, declining to $270. Within a 24-hour period, bitcoin price recorded a 11.6 percent increase, rising from $4,000 to around $4,410.
Ether also recorded a massive gain, increasing by over 17 percent within a single day from $270 to $320.
In previous coverages, CCN reported that the price of bitcoin and Ethereum will likely increase to new highs in the upcoming weeks due to the market’s optimism surrounding the scalability of the two cryptocurrencies. Through the activation and integration of the Bitcoin Core development team’s transaction malleability fix and scaling solution Segregated Witness (SegWit), the size of the bitcoin mempool decreased significantly over the past week and users have started to experience substantial decrease in transaction fees.
For Ethereum investors, the Ethereum Foundation’s announcement in regard to its launch of the Metropolis hard fork and Ethereum co-founder Vitalik Buterin’s scaling solution Plasma co-written by bitcoin two-layer micropayments network Lightning demonstrated an active year of Ethereum development and thus, increase in value of the network. As Ivey Business School professor and cryptocurrency researcher JP Vergne stated:
We found that the best predictor of a cryptocurrency’s exchange rate is the amount of developer activity around it.
On September 4, it was revealed that the Chinese central bank, the People’s Bank of China, declared ICOs as an illegal method of fundraising. PBoC immediately suspended all ongoing initial coin offering (ICO) campaigns and requested ICO-conducting blockchain startups to refund their investors in bitcoin and Ether. At the time, Shanghai-based fintech consultancy Kapronasia Director Zennon Kapron still showed optimism toward the Chinese ICO market but the announcement from PBoC led to a crash in the cryptocurrency market.
“Regulators globally are struggling to understand what ICOs are, what the risks are, and how to ring-fence and regulate them. China, in many ways, is no different than the U.S. or Singapore in saying, ok, we need to push back on these for now until we figure out how to deal with them… I think it will be slightly a temporary measure,” Kapron said.
A large factor in the swift recovery of the price of Ether has been the statement of the Hong Kong Securities and Futures Commission (SFC) in regard to the legality of ICOs. In its statement, the Hong Kong SFC emphasized that as long as ICOs and token sales are licensed by the SFC, ICOs can be conducted by blockchain startups without running in conflict with existing financial regulations.
“Where digital tokens offered in an ICO represent equity or ownership interests in a corporation, these tokens may be regarded as “shares”. For example, token holders may be given shareholders’ rights, such as the right to receive dividends and the right to participate in the distribution of the corporation’s surplus assets upon winding up,” read the statement of Hong Kong.
Overnight, Hong Kong has allowed the ICO community to regard the country as a haven for ICOs. Following the pathway of EOS, by offering an investor guideline which strictly outlines that tokens have no purpose or use case, ICOs will not be in violation of Hong Kong’s SFC regulations.
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