The price of Bitcoin has just dropped to about $4300, a decline of approximately 14% from the record high of $5000 achieved over the weekend.
It is not immediately apparent why the price of Bitcoin has retracted so much, but it could be influenced by reports of China banning ICOs. If that is the case we should expect to see the price of Ethereum, which most token sales employ, react even more – and indeed that is what we are seeing.
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Since reports in China came out that Chinese regulators are trying to put a stop to token crowd sales, over the past 24 hours Bitcoin fell just under 7% while Ethereum fell over 13% to around $300 per ETH.
Another possible explanation is that many traders and investors placed sell orders at or just below the $5000 price level and it thus triggered a major selloff. New cryptocurrency traders, that entered the field only recently after being attracted by mainstream media attention, could have seen this and joined the selling trend.
It is important to note that the recent decline still leaves Bitcoin traders with an amazing return over the past year, and even just month over month. Only in mid-August did the price reach $4000 for the first time. Additionally, Bitcoin’s market cap remains above $71 billion, almost identical to the market valuation of PayPal (NASDAQ: PYPL).