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China’s ICO Ban Is Not Working, The Cryptocurrency Bubble Continues to Brew

The restrictions on ICOs and cryptocurrency transactions in China seems not working as the government hoped. The crypto market is still thriving and the bubble continues to grow in the country, according to an investigatory news report by China Central TV (CCTV), a state-run news outlet.

Last September, Chinese government has put an end to the fraud and manipulation of the cryptocurrency market by banning all ICOs and transaction of cryptocurrencies; Months later, regulators reiterated its stance by blocking access to all domestic and offshore crypto exchanges since this February.

It seems these moves were a huge blow to the emerging industry within and outside the country, but actually it’s not.

According to the report titled “Blockchain-based Cryptocurrency Bubble Accumulates”, the country’s unabated clampdown cannot stop the enthusiasm of Chinese investors. Just as Bobby Lee of BTCC said, “The more the governments and the regulators tried to put a squeeze on bitcoin, the more we see that bitcoin is actually resilient”.

Unstoppable investors- crypto market still thriving

It is reported that Yang Chao, a cryptocurrency investor, has lost tens of millions of yuan shortly in two months since this January with mistimed bets on bitcoin.

Yang said he bought about 3 million yuan worth bitcoins at the price of around 100,000 yuan ($15,687) per coin this January, then the price went down. Every time it has dropped by 10%, he would buy more in.

Actually, it is not the first time that Yang Chao has speculated on crypto coins. Prior to the ban on ICOs and cryptocurrency trading platforms, he has lost over 2 million yuan ($313,745). He said the ICO ban laid little effect on investors like him. But this time, he lost much more.

“There’re lots of Investors like me, maybe 800, (of which everyone suffers losses).” The great price fluctuation is the main reason Yang invests in cryptocurrency. “The price of bitcoin has once exceeded 120,000 yuan (almost $20,000) in less than 10 years since its birth. In such a soaring market, the illusion of getting-rich-overnight lures a large number of investors in.”

Zheng Haosheng, with the label of “post-95s / holding 1,000 bitcoins”, has turned 140,000 yuan into hundreds of millions in a year, and currently invests more than 50 crypto tokens. While professional investors like him are not always the winners.

Zheng told the reporter that he had lost 200 bitcoins in recent two days. That worth 10 million, not to mention the 30 million indirect losses. The money you make is from those losers. 80% of those who get in without any preparation or knowledge are losing.

There are currently about 1,600 active cryptocurrencies in the world, generating a cumulative transaction volume of over $10 billion a day. Bitcoin alone accounts for about $6 billion transaction volume per day. And Chinese investors are big players in the crypto game.

According to Mao Hongliang, director of the Blockchain Research Office of the National Internet Financial Security Expert Committee, taking one of the largest international platform as an example, since the start of year 2018, the exchange volume between digital currency and RMB is about 1.3 billion yuan, accounting for about 13% of the total transaction volume on the platform.

Abundant shitcoins- crypto bubble continues to brew

Before September 2017, the crypto market in the country was dominated by Bitcoin, Litecoin and Ethereum. But now there seems to be an abundance of badly designed shitcoins in the crypto world. Over 100 crypto coins/tokens are listed on OKEx and Huobi.

In this backdrop, the enthusiasm of investors is unstoppable, and apparently the bubble continues to brew.

Li Xiaolai, an early bitcoin adopter and bitcoin whale in the country, said, it is apparent that there is a bubble in it, and it’s always there. But no one knows exactly where the bubble is, and how big the bubble is. In the bubble, the most dangerous one is the “air coins” (created out of nothing) backed by no real projects.

In January 15, 2018, HEC (Hero Chain), which claims to be the world’s first gambling game platform to support cryptocurrency, failed to hold its ICO price dropping from 0.6 yuan (ICO price) to 0.05 yuan upon listing. Soon it was investigated by public security organs for suspected fraud. In the same month, another coin named SPC (Space Chain) which fundraised 1 billion yuan in one day was confirmed as an air coin.

The ICO ban drives some of shitcoin teams offshore, either moving their servers or getting registered abroad. It is thus difficult to find and track them.

As long as shitcoins exist, capital would flow into it. Because the market lacks effective regulation, those shitcoin teams can take advantage of the game of price manipulation to get away with the funds of retail investors.

The lack of openness and transparency, the volatility of prices, as well as investors’ getting-rich-overnight illusion, has amplified the risk of the crypto market.


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