There has been a lot of frenzy around South Korea’s rumored plans to shut down cryptocurrency exchanges. In fact, the price of Bitcoin fell by an approximate $2,000 which caused its price to fall to 13,703.38. This decrease in price has been a pop in the Bitcoin bubble that many traders have been anticipating. Bitcoin wasn’t the only cryptocurrency affected by South Korea’s decision. The other top 10 most traded cryptocurrencies, which accounted for 83.5% of the total valuation in cryptocurrency market also imitated Bitcoin’s price trajectory. As a result, all of them also fell.
Among the biggest losers in the market were IOTA and Bitcoin Cash as they both shed 12.28% and 9.78% of their respective values. On the other hand, Ripple moves the opposite direction. This came after news that Japanese credit card companies are interested in testing its technology. The price positively increases from this news. The overall cryptocurrency market capitalization also suffered from the reversal of the price for Bitcoin. Many other cryptocurrencies were also undoubtedly affected by this move.
South Korean government on high alert
December 27, the South Korean Government threatened to close down cryptocurrency exchanges and ban anonymous trading accounts. These moves were announced, right after the banning of ICOs. The government also fined Bithumb, which is Korea’s largest cryptocurrency exchange for a June 2017 hack.
Mirroring the cryptocurrency frenzy around the world, South Korean were gripped by cryptocurrencies in 2017. In fact, the proof of their enthusiasm for the market is proven when they are willing to pay more than 30% over regular prices simply to trade in cryptocurrencies. The nation’s largest cryptocurrency exchange, Bithumb plays an important role in determining the price of the alternative coins such as Ethereum and Bitcoin Cash.
If outsiders were to judge the South Korean cryptocurrency situation, they would say that the South Korean government may be cracking down on cryptocurrencies. However, the move them by the government is more of a warning to investors about potentially overheating the market.
So, is South Korea reallybanning cryptocurrencies?
The commotion started when an initial report from Reuters stated that the South Korean government were prepared to close cryptocurrency exchanges in the local market. However, the report has since then been corrected as the South Korean government claimed that they never released such a statement. In a document released by the South Korean government, there were several important points that must be noted.
- The government will continue to evaluate cryptocurrency trading trend and impose practical regulations in a timely manner.
- The government has drafted a special cryptocurrency law and is only considering shutting down cryptocurrency exchanges that have been involved in illegal activities such as money laundering.
- The government will handle strictly speculative movements in the local cryptocurrency market but will facilitate the growth of cryptocurrency and blockchain technologies.
South Korea has already imposed one policy to prevent underage and foreign investors from trading cryptocurrencies in their local exchanges. This is done to ensure that the speculative mania from the South Korean market will remain under control.
In the past, the South Korean Prime Minister and Deputy Prime Minister have publicly expressed their concern about the cryptocurrency mania. This has led underaged investors, including middle and high school students to invest in Bitcoin. There has also been a worrying trend stated by the Prime Minister that more students allocate a large portion of their time trading cryptocurrencies.
Foreigners are also banned from trading Bitcoin or other cryptocurrencies in the local market. This was all because of a previous crackdown on Chinese traders who brought in amassive amount of Bitcoin from China to South Korea with the sole intent of arbitraging and laundering money.
Inmore positive news, the South Korean government has acknowledged Bitcoin as a legitimate class market and is looking towards regulating Bitcoin in the future. However, the government does not intend to interfere in the growth of its local cryptocurrency market. Rather, the government wants to regulate the market better.
Scams surfacing in the market
The South Korean government concern over the lack of regulation in the cryptocurrency world is justified because there is an increase in large-scale cryptocurrency-related Ponzi schemes, which were really discovered throughout the country. One of the largest Bitcoin-related Ponzi schemes was a $200 million operation which took funds from middle-aged investors to old investors.
Local exchanges have also been responding positively towards the possibility of the South Korean government implementing regulations. The public can also increase the level of trust they have towards the local cryptocurrency exchanges with regulation. This way, this will prevent more people from getting scanned and allocating their money to Ponzi schemes. Instead, they will be redirected to regulated platforms.
In their move to regulate the cryptocurrency market, South Korea will be following in the footsteps of the United States and Japan. The South Korean government has no other choice but to follow the regulatory frameworks and trends established by other leading governments. While there is a negative reputation attached to cryptocurrencies, the government’s stance is to allow what has to be allowed for the benefit of the South Korean market.
So far, the South Korean government has taken a positive stance towards welcoming cryptocurrencies into their market. By better regulating the market, this will facilitate the demand for cryptocurrencies and local exchanges. Investors in the cryptocurrency market also remain to be highly optimistic about the long-term growth trend for Bitcoin.
Where is Bitcoin headed in 2018?
Can be overheating of cryptocurrency market has also affected operations at exchanges. Three well-known exchanges have announced that they will no longer be accepting new users. The negative implications of this move include declining volatility in prices for Bitcoin.
Experts believe that there will be a midpoint price of $14,000 for Bitcoin in 2018. Bitcoin is also expected to undergo four crashes of 40% or more during 2018. Nevertheless, the volatility of Bitcoin will remain because cryptocurrencies, in general, are hard to value and the economy utility relies on use cases which are not yet built.