Is Bitcoin Benefiting From The ICO Crackdown?
According to several analysts, the answer to this question is yes.
However, not everyone agrees, and for some, the situation is a bit more complicated than a simple “yes” or “no” reply.
[Ed note: Investing in cryptocoins or tokens is highly speculative and the market is largely unregulated. Anyone considering it should be prepared to lose their entire investment.]
In recent months, ICOs have become the target of growing scrutiny in many jurisdictions, including China, South Korea and the United States.
China banned these token sales in September, and later that month, the country’s three largest exchanges announced that they would soon stop offering local trading.
South Korea soon followed China’s example, banning all ICOs and citing its concerns about fraud and “speculative demand,” according to Business Insider.
Both of these nations prohibited these token sales after the U.S. Securities and Exchange Commission announced that sales of digital assets were subject to U.S. federal securities laws.
While these developments might create challenges for companies holding ICOs – or investors who have purchased their tokens – they are providing tailwinds for Bitcoin, according to several analysts.
Because these token sales are getting banned and/or regulated globally, it encourages people to hold Bitcoin instead of alternative protocol assets (altcoins), said digital currency trader Marius Rupsys.
Due to the uncertainty that surrounds new ICOs, investors are selling altcoins and instead purchasing Bitcoin, he added.
Jonathan Johnson, president of Medici Ventures and Overstock.com board member, offered a similar point of view.
“When China cracked down on ICOs and coin exchanges, investors that needed to get out of the exchanges had limited choices,” he stated. “Many saw Bitcoin as a good place to go.”
Investors often flock to Bitcoin as a safe haven, noted analysts, and the sharp increase in scrutiny surrounding ICOs is a perfect example of a situation that could motivate them to purchase the digital currency.
“I think that any time there is a macro event in the blockchain instruments space, there will be a flight of capital to the more stable crypto currencies,” said entrepreneur Marshall Swatt.
Amid this broader trend, Bitcoin could easily benefit, as its use as a safe haven asset has been growing, Sean Walsh, partner at Redwood City Ventures, asserted.
“The faith in this relatively young asset has grown at a breathtaking pace in recent months,” he said.
While some analysts contended that Bitcoin is benefiting from the crackdown in ICOs, others described the situation as being a bit more complex.
“It’s a dynamic market with several forces at work,” stated Matthew Unger, founder and CEO of iComply Investor Services inc. As a result, it’s not just a matter of Bitcoin vs. altcoins, he asserted.
“I wouldn’t say that market participants are flocking to Bitcoin, it appears that Bitcoin has just weathered this recent storm differently than other digital assets and currencies,” said Unger.
Robin Bloor, senior VP of strategy & communications for software provider Algebraix Data, stated that while Bitcoin is benefiting from the greater scrutiny of ICOs, this is only part of the story.
“Some investors are running scared of some of the Altcoins, particularly coins whose utility is questionable,” Bloor asserted. However, he emphasized that the broader digital currency market has recovered nicely since its total value hit a recent low in mid-September.
As a result, Bitcoin’s recent appreciation may largely be the result of new money entering the market, stated Bloor.
ICOs Still Going Strong
While some analysts agreed that the ICO crackdown has helped provide tailwinds for Bitcoin, others disagreed with this premise.
Tim Enneking, managing director of Crypto Asset Management, emphasized that investors can still participate in ICOs.
Iqbal Gandham, UK managing director of social trading platform eToro, provided similar input.
“ICOs are still raising money,” he stated. “There is concern as with everything related to regulation.” The recent scrutiny of these sales might make “a few people” weary, but it is not preventing market participants from investing, said Gandham.