The Crypto-Crash, ICOs & Why China Banned Them

Money is raised for a future coin by selling "initial coin offerings" (ICOs). These are called tokens because they're not official coins until they're released in the public market.

If they don't sell enough tokens to start the project the money is supposed-to be returned to the buyers/investors and the project is deemed "a failure."

In this way.... the person or people who tried to develop the coin have no out-of-pocket costs while the odds of a successful release are increased due-to more working capital behind the coin.

Ethereum was a successful ICO, and the tokens were called "Ether," so new coin-creators usually copy the Ethereum model. Ethereum managed to raise $18 million before it was ever released and when it was released the price for a coin shot to $14 dollars. Early investors were happy, the public was happy and everybody won.

Why Did China Ban Them?

There have been examples of ICOs that took money from early investors, never released the coin and basically disappeared. This is possible because the crypto-world is unregulated by the exchange commission or any government. The "early-idea-people" called the investments "donations" in defense of themselves, and the scheme was beginning to grow more and more popular.

What does This Have To Do With Bitcoin?

Nothing really. When people think of crypto-anything they think of BitCoin so some people panicked and spread rumors stating that China was banning the whole crypto-market. So - many people, particularly in parts of Asia, took their money out of all Crypto Currencies and of-course... BitCoin is the big-dog, although it wasn't the hardest-hit. The Asian-based coins took the biggest hit.

Is It A Good Thing?

Yeah, it probably is and other countries will probably follow China's lead.

No one is comfortable with watching BitCoin lose $900 of its value, but ultimately the regulation was implemented to protect the public from being scammed by people who said they were developing a coin but never had any intention of doing-so.

The other example of failure is a "person, or company," who did-indeed have every intention of releasing the coin but mismanaged the working capital, overpaid their employees and just spent so much money that they couldn't develop the coin.

What's Next?

As people begin to see that it's a good thing and that they over-reacted, they'll come back into the market or the opportunist-buyers - like myself, will buy so much at bargain-basement prices that the market will continue to move upward, which is already happening.

Or... BOTH!

Peace!
John Disque