Monday certainly wasn't a great day for the volatile Bitcoin price.
According to Coindesk, the cryptocurrency fell from a high of US$4,629 all the way down to as low as US$4,172 during the last 24 hours of trade.
From top to bottom, that's a decline of just less than 10%.
Although it has recovered slightly since then, Bitcoin is still down over US$200 at US$4,400.
Why did it sink?
Yesterday's slump appears to relate to news that the People's Bank of China has labelled initial coin offerings (ICO) as illegal.
According to Bloomberg, the central bank has asked for all related fundraising activity to be halted immediately following an investigation into ICOs.
Furthermore, all ICOs that have been completed are expected to return their funds to investors.
It wasn't just Bitcoin which suffered as a result of this news. Cryptocurrency rival Ethereum plunged more than 16% on Monday.
What's an ICO?
An initial coin offering is a way for a company to raise funds through the use of cryptocurrencies.
Whilst many are legitimate, due to the fact they are unregulated there are concerns that they will be used to exploit investors.
Where next for Bitcoin?
Whilst I suspect that Bitcoin will recover from this latest blip, I would suggest that anyone with exposure to Bitcoin watches what China does very carefully.
An estimated 80% of Bitcoin activity occurs in China according to Coindesk, so should the government place restrictions on the cryptocurrency there is a danger that its price could plummet.
In light of this, I would suggest investors resist the allure of Bitcoin and instead focus on quality ASX shares such as Altium Limited (ASX: ALU) and XERO FPO NZX (ASX: XRO).
I think these two shares are a great way to grow your wealth steadily, rather than risk losing it all on a Bitcoin gamble.
